Looking for the most common types of Trade Order Timing? Before that, if you want to learn more about TOT, then please refer to our last article on Trade Order Timings. Due to ever-changing technology, investors can now opt to buy or sell stocks themselves.
This self capability trading option saves investors from paying large commissions for executions of trades to advisors.
However, before the execution of trading of shares, it’s important to understand the types of trade order timing and how they accompany your trading style.
What are the Types of Trade Order Timing?
There are so many different types of ToT followed by experts all over the world. But out of the many, the most common types of trade order timing are given below:
- Market Order
- Fill or Kill
- Good Today/ Day Order
- Goods Until Specified
- Goods Until Cancelled
Let’s learn more about each of the types of ToT features and patterns in detail.
The market order is basically more of a type of trade order rather than a type of time order. The market order nature, anyhow, speaks of these orders to be executed immediately at the best-given price.
Let’s take an example – an investor wants to purchase bitcoin in a market order and the market rate is $2000 per bitcoin. Then it is the price – trader will receive. The order will take place immediately up to the specified stated volume.
This is the highest liquidity option available to the trader, but with the lowest level of control.
Fill or Kill
As the name defines itself, Fill or Kill (FOK) orders either execute at the same time (immediately) or get canceled if conditions don’t meet. Generally, FOK orders need the whole volume of the order to meet the conditions that too at a specified price. Otherwise, the order gets canceled. Though these are some orders where partial order gets executed whereas the remaining volume of order gets canceled. It is more popular with the name – ” Immediate or Cancel Order”.
Let us take our previous Bitcoin Example – Suppose the trader wants to buy 5 Bitcoins in a Fill or Kill order. Unfortunately, only 2 Bitcoins are available at his mentioned price then the order is not filled, hence canceled totally.
However, in Immediate or Cancel Order, the order will get partially done with 2 BTC and the remaining 3 BTC’s are canceled.
These types of orders provide liquidity options as well as more control than a market order. If a trader here wants to go for a better price for completing a purchase at a higher chance, then he/she will meet with higher liquidity. However, if the trader opts only for a specified price and no seller in the market is willing to trade at that level, then the order may be killed.
Good Today/ Day Order
A day order is quite intuitive in its name. This means that these orders are good for the day for which they set, and also get canceled if the conditions don’t meet by the time market closes. Again it’s like FOK orders, i.e., most orders need to be filled in full. Here in day order also the order can be partially completed with the remaining balance canceled on the market closes.
It provides a fair amount of control to an investor. A day order is not that typical as a trader not have to go through an unforeseen event that can shift the market upside down. In other words, it only deals in one day so it’s much easier to manage than for a week or so.
Good Until Specified
In this type, a trader is the one who specifies when the trade to be canceled if not completed. This also trade-off control for the duration of the trade. The longer the period the more the chances of success of the trade i.e., completed but it also means higher risk (Sudden changes or trend change).
Good Until Cancelled (GTC)
Last but not least the GTC order. Again as per the name states that the order will remain active until it is being canceled by the trader. This is perfect for hard-working traders who are totally active in managing their orders and hence able to predict the unforeseen changes that can tend to occur and hence, cancel their orders accordingly. This type of trade is not for those who set their target and just leave until its being completed. Here’s the danger is if the trader forgets about the order after some time, resulting in filling up the order at a date when trade would no longer be interested to enter into the market or direct (buy or sell).
For Instance, there are two traders and want to invest in Bonds Exchange. Both traders want to get a 12% 3-Years A-rated bond from Company Z. The current market price is $1673, but traders wish to get it for $1600, knowing the price is slightly higher or overrated. They set GTC for 100 bonds at $1600.
Then it comes to know, company Z is going through a hard time resulting in the dropping of its creditworthiness. resulting in the prediction of the dropping of trade prices once the market opens. One trader cancels his GTC order totally whereas another one who wishes to buy has forgotten. Resulting in the purchase of those bonds at $1600, whereafter when the market opens and stabilizes around $1300. Resulting in the trader at a loss whereas the other one who canceled his order can now put a new order to buy bonds at a more favorable rate.