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1. Market order

A market order is thesimplest of the order types;

It is a buy or sell order to be

executed by the brokerimmediately at currentmarketprices;

As long as there are willingsellers and buyers, a marketorder will be filled.

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2. Limitorder

the most frequent orders in the market;

Limit orders instruct your broker to buy orsell a stock at a particular price.

Limit orders have always attached theclause at a better price;

The purchase or sale will not happenunless you get your price or a better one

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Ex: Market versus Limit orderScenario 1

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Scenario 1

In this scenario, Bill was most concerned withreceiving an executionand was willing to accept

the current bid price. John was most concernedwith the pricefor selling his shares of XYZ andwas unable to sell because the stock's bid pricewas below his limit price. As you can see in the

chart, the stock continued to decline and John'slimit order to sell at $12.20 did not becomemarketable for the rest of the day.

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Ex: Market versus Limit orderScenario 2

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Scenario 2

In this scenario, Bill was willing to acceptwhatever was the current bid priceprovided he received an execution. John

was most concerned with the price forselling his shares of XYZ and was able toreceive an additional $100 in additional

sale proceeds (excluding commissions).

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3. Stop Order or Stop-Loss Order

An order to buy or sell a security when itsprice surpasses a particular point, thus ensuring agreater probability of achieving a predetermined entry orexit price, limiting the investor's loss or locking in his or

her profit Once the price surpasses the predefined entry/exit point,

the stop order becomes a market order

Ex. Setting a stop-loss order for 10% below the price youpaid for the stock will limit your loss to 10%.

Can be suitable before you leave for holidays or enter asituation in which you will be unable to watch your stocksfor an extended period of time

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4. Stop-Limit Order

An order placed with a broker that combines the features of stoporder with those of a limit order. A stop-limit order will be executed ata specified price (or better) after a given stop price has beenreached.

EX.:Assume that ABC Inc. is trading at $40 and an investor wantsto buy the stock once it begins to show some serious upwardmomentum. The investor has put in a stop-limit order to buy with thestop price at $45 and the limit price at $46.

If the price of ABC Inc. moves above $45 stop price, the orderis activated and turns into a limit order. As long as the order can befilled under $46 (the limit price), then the trade will be filled.

If the price rises above $46, the order will not be filled.

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Order types (cont)

5. Day order

A day order(the most common) is good only for oneday. It is in force from when it is entered to the end ofregular trading on the same day. A day order is assumed

unless another thing is specified

6. Good-til-cancelled order (GTC)

A good-til-cancelledorder requires a specific cancelling

order. It can persist indefinitely (although brokers mayset some limit, for example, 90 days

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Order types (cont)

7. Orders with additional constraints

fill or kill (FOK) - either filled (partially

or completely) on the first attempt orcanceled ;

All Or None (AON)- the order must be

completely filled or not filled at all

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Quiz

1. You want to buy 100 shares of BRD

right now, regardless of the price. What

type of order would you place?

a. Sell orderb. Market orderc. Stop order

d. Limit order

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Quiz (cont)

2. You give an order to your broker to buy1000 SIF2 shares at a price of 0.8 RONper share. This is a.........order:

a. market;

b. stop loss;

c. limit;d. day.

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Quiz (cont)

3. A broker receives an order from a client to bythe asset XYZ at a price of 100. If the asset iscurrently traded in the market at 99, then thebroker should:

a. wait until the price becomes 100 and then fillthe order;

b. fill the order immediately by buying the asset at

99;c. demand additional instructions from his client;

d. the broker cannot execute the order.

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Priority of transactions

2 important Rules:

A. The best price (price priority): Thetransaction is executed for the best price(biggest bid price, smallest ask price).

B. Market ordershave priority.