Order Type in Share Market
Market Order meaning
A market order means buying and selling at the best price available. A limit order means buy and sell at a predetermined price. Stops and limits can be used to protect investors from market crashes. Before getting into the stock market you should be aware of the three main types of orders. If you want to keep things simple, you can take market orders into account.3 Order Types: Market, Limit and Stop Orders.
Topics that we will cover in this post:
- Market Order Vs Limit Order.
- What Is an Order?
- Order Type in Share Market.
- The Basics of Trading a Stock: Know Your Orders.
- Types of orders in stock market India.
- 3 Order Types: Market, Limit and Stop Orders
- Market order example.
- What is a limit order in stocks?
- What is order in the stock market?
- market order vs limit order.
- Types of orders in stock market pdf.
Market Order Vs Limit Order
Market Order
Market orders guarantee that your order will be filled at the best price. It may not fill you at the price you want, but it will. So let's say you want to buy 100 shares in Xyz. You are investing for the long term, so the slight difference in price is not really a concern for you. You should place a market order and your broker will fill it at the best price for which the shares are available.
If you want to have a little more control over the process, here are other things you can do, using Xyz stock as an example.
Limit Order
Limit orders allow you to buy or sell at a predetermined price. Here is an example of limit orders in action.
➤ Buy Limit Order
Suppose you want to buy 100 shares of XYZ company, right now the price of one share of Xyz company is Rs 50, and you want to buy it at Rs 45 share price. You can place a Buy limit order to buy the shares at the desired price. After placing the order, if the share of Xyz goes to 45, then your order will be completed and 100 shares will be bought at the rate of Rs 45.
➤ Sell Limit Order
Through Sell Limit Order, you can sell the purchased shares at the desired price. For example, if you bought 100 shares of company XYZ earlier at the rate of Rs 45 per share. If you want to sell that 100 shares at Rs 60 per share, then you can place a sell limit order. If the share price rises to Rs.60 then 100 shares of your XYZ company will be sold.
The Buy Limit Order or Sell Limit Order that you have placed, if that price is not hit then your order will not be completed.
Stoploss Order
A stop-loss order is an order in which you place an order to buy or sell a specific stock. The investor's losses are limited by using stop-loss orders. There are mainly two types of stop-loss orders
➤ Stoploss Market Order
When you place Stoploss Market Order, then this order protects you from avoiding huge losses. Suppose you have 100 shares of XYZ company which you have bought at the price of Rs.50. If the share price falls to 30, you will avoid huge losses. If you want to avoid this loss then you can place Stoploss Market Order.
In this, you can place a Stoploss Market Order sell order at Rs 40. When the share price drops from Rs.50 to Rs.40 then your order will be executed and your shares will be sold. Your shares will be sold at the best price you are getting in the market. Even if the share price falls after this, you will not have any loss. By Stoploss Market Order, you can avoid a lot of loss.
➤ Stoploss Limit Order
When you place Stoploss Limit Order, then this order saves you from incurring more losses. Suppose you have 100 shares of XYZ company which you have bought at the price of Rs.50. If the share price falls to 30%, you will incur huge losses. If you want to avoid this loss, then you can apply for Stoploss Limit Order.
In this you can place a sell order of a StopLoss Limit Order at Rs.40. In this you have to set a limit price and also set a trigger price. When your trigger price hits Rs.41, your sell order goes to the exchange and your shares will be sold at whatever best price you get between Rs.40 and Rs.41.
Your shares will not sell if for some reason your trigger price is not hit
When would I use these order types?
Let's say you go on a month-long trip to the Himalayas and can't see your stocks during that time. You may want to consider entering a stop-market order before leaving. If you are far away it will save you a big loss in case of a market crash.
Be aware that as your orders get complex, your broker's commissions can be high. Double-check that it is worth it before placing a double-stop or limit order. Even with all these options (and more) available to you, when buying and holding great companies over the long term, simple market orders are usually the best way to go.
Final Thoughts
By understanding the different types of orders in the stock market, any investor can trade easily. You can use it to trade equities as well as other sectors such as currency and commodities. By using stock orders correctly, you can increase your profits and reduce losses.
Topics about the stock market that every investor should know.
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