Buying and selling stocks is achieved through placing orders, and of the many order types, the two primaries are the market order and the limit order. In short, the market order is a go-ahead to purchase or sell a stock right away whenever the best price is made available. A limit order, as the name suggests, carries a limit on the maximum and minimum price that is allowable when selling or buying a stock. In the day-to-day world of stock trading, these are the two most common orders that a new investor will encounter.

There are several variations on these order types, however, for which every trader should be prepared. By educating themselves on the intricacies of the following order types, investors can equip themselves to better their trades on the market by identifying which order will make more efficient use of their time, which orders are best suited to help them reach their trading goals and which orders offset some of the risk inherent in trading.

A stop order, for instance, is an order which will remain inactive until a given price on a stock has been breached. As soon as the price threshold has been crossed, the stop order activates and is then considered a market order. This differs from limit and standard market orders in that a stop order is inactive as soon as it is instituted, whereas limit and market orders are considered to be active.

Stop orders work by setting a price limit that, when crossed, will determine that the stock should be sold. For instance, if a stockholder places a stop order of $25 per share of their stock, then the stop order will remain dormant until the time when the stock’s price meets or drops below $25. At that time, the stop order converts into a market order and the shares are disbursed at the best price available at that time. Stop orders are effective tools when the stock trader does not have the schedule that allows them to constantly monitor the market, and they would like protection from a significant loss in stock price.

All or None orders, also referred to as AON, are critical for investors who concentrate on penny stocks. True to its name, an all or none order is placed when a stock trader wants to guarantee that they receive all the stock that they request. Otherwise, they will not receive any stock at all.

By way of example, if an investor places an order to buy 1,000 shares of a stock that is limited to 500 shares, then the all or none order determines the trader will not see their order of 1,000 until all of it becomes available at the price they requested. Minus an all or none order, the stock trader in this example would receive a part of their order in the amount of 500 shares.

The good till cancelled order, or GTC, places a time restriction on an order. It will stay open until the trader demands that it be closed, and while this puts a lot of control in the trader’s hands, the majority of stock brokerages will cap the amount of time that a good till cancelled order will remain active at 90 days.

A good till cancelled order must also have the expiration period specified at the outset, or else it will be considered a day order. A day order will result in the closing of the order at the conclusion of the given trading day during which the good till cancelled order was instituted. Unless the order is filled by the end of the trading day, then the investor will be required to place their order anew at the start of the next day of trading.

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