To take advantage of investment opportunities, you need to place an order in the stock market. With these, you will be able to buy and sell financial assets to manage your portfolio. This is why you need to learn how to place a stock market order to make the most of the various market movements and multiply your investment.
What is a stock market order? What are the different types of stock market orders? Which type of stock market order is best for your strategy? Find out everything you need to know about stock market orders in this article.
What is a stock market order?
A stock order is a detailed instruction sent to your broker or financial institution to buy (or sell) a stock. In addition to stocks, you can use an exchange order to trade any financial asset, such as a bond, ETF, index or derivatives.
Once issued and processed, your stock warrants are entered into the order book for execution based on supply and demand and according to certain priority rules.
Different types of orders in the stock market
A limit order will only be executed if it reaches a specified price level (buy order at maximum price or sell order at minimum price) for the quantity available at the time of execution. Execution can therefore be partial, pending or even impossible, depending on the order book.
A market order, or best available price order, is an order in the stock market that is executed at the best available price immediately. Thus, it is executed regardless of what happens to the desired quantity, but you have no control over the price level.
There are two main types of stop orders: stop limit orders and stop range orders.
Stop orders are often associated with stop loss and take profit orders, which allow you to limit losses and provide profits respectively. A market order is automatically executed when a financial asset exceeds a threshold you set (it then becomes a market order).
A stop-limit order works the same way, but includes a limit so that you can control the price at which you enter or exit the position. The order will only be executed within the page or price range you specify.
How to choose the best stock orders?
To choose the best type of stock market order, you first need to consider your investment strategy and your financial goals. Then you need to prioritize the price, execution volume, and execution time of your stock order.
A market order, for example, will be prioritized over a limit order. It will therefore be executed faster and in full, but without any price conditions. A limit order, on the other hand, allows you to control the buy or sell price, but not the speed or execution of the order.
Therefore, if you prefer price control without guaranteed execution, a limit order will suit you, and if you prefer speed of execution without price guarantees, a market order will suit you better.