Order Types Used by Traders and Investors – Market Order – Limit Orders – Stop Orders
In today’s video we’re going to talk about the different types of orders that futures traders use market orders limit orders stop orders that kind of thing we’ll also talk a little bit about algorithmic orders and maybe if you guys find that topic interesting i can do another longer video on alko’s but anyhow this video is part of a series about financial
Derivatives if you’re interested in that topic you might find some of my other videos interesting so types of orders in futures market the first order we’re going to talk about is the simplest order and it’s called a market order and this is simply an order to a broker to buy or sell at whatever the going market prices for the underlying the next order type is
Probably the one that’s most popular with traders and that’s a limit order a limit order is in order to buy at no more than a specific price or to sell at no less than a specific price limit orders are used when the trader wishes to control the price rather than the certainty of execution so with a market order you’re guaranteed to get a fill you’re guaranteed
To execute that trade you’re just not sure if the price you you might worry that you’ll get a bad price in a fast-moving market with with the limit order you’re not sure that you’ll get filled that you’ve got some control over what prices you you deem acceptable or not so a limit order gives the trader control over the price of which the trade is executed but
The order may never actually be executed our next orders that we’re going to look at is called a stop order and often people call this a stop-loss order as well it’s an order to buy or sell once the price reaches a specified level which is now as the stop price so when the stop price is reached a stop order becomes a market order a buy stop order is entered at
The stop price above the current market price a sell stop order is entered at the stop price below the current market price investors generally use a buy stop order to limit a loss or to protect a profit on something that they have sold short investors generally use a sell stop in order to limit a loss or to protect the profit on something that they own certain
Exchanges have stopped offering stop order types in 2016 the new york stock exchange plans to no longer accept stop orders and good till council orders the reason they give is that many retail investors you stop orders as a potential method of protection but don’t fully understand the risk profile associated with the order type we expect our elimination of stop
Orders will help raise awareness around the potential risks during volatile trading is what the new york stock exchange say brokerage firms may still offer these types of orders to customers and execute them through in-house algorithms but the orders will no longer be available directly from the exchange the next order type that we’ll talk about is called a stop
Limit order and this is obviously very similar to a stop order it’s an order that combines the features of a stop order and a limit order so once the stock price is reached the stop limit order becomes a limit order to buy or to sell at no more or less than another pre-specified limit price as with all limit orders a stop limit order doesn’t get filled if the
Securities price never reaches the specified limit price so that is a stop limit order the next order type we’ll talk about is a market if touched order and that’s an order to trade at the best available price if the market price first goes to the if touched level as soon as this trigger price is touched the order becomes a market order lastly we’ll talk about
A discretionary are also it’s also known as a market not held order and that’s an order that uses the brokers discretion to try and get the best price they can hopefully you found this video helpful later i’ll put up a video on algorithmic order types if enough people are interested let me know in the comment section below if you’d like to see that these videos
Are all based on my book trading and pricing financial derivatives which is available on amazon.com and if you’re interested in that take a look for the link in the description below if you found this video helpful please hit the like button if you’d like to see more of them hit the subscribe button have a great day and hopefully i’ll see you later bye
Transcribed from video
Order Types Used by Traders and Investors By Patrick Boyle
