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Trading orders 101: Everything you need to know
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Types of orders
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There are different types of orders that you can place in the markets. Here are the three broad categories of orders commonly used.
Broadly speaking, you can place three different types of orders on the market. These are market orders, limit orders and stop-loss orders. A market order is a trading order to buy or sell a security immediately, at the current market price. Market orders to buy shares are executed at the lowest offer price in the market. And market orders to sell shares are executed at the highest bid price in the market. A limit order is a trading order to buy or sell a security at a specific market price. Limit orders to buy shares are executed at or below the order price. Limit orders to sell shares are executed at or above the order price. A stop loss order is a trading order that helps to limit losses in case the market moves opposite to the expected direction. Say you buy a share at Rs. 100 and place a stop loss at Rs. 97. If the share price rises, you stand to gain. But if it falls, your loss is limited to Rs. 3. That sums up the three main kinds of orders. Keep the journey going and learn about market depth and price bands in the next chapter of Smart Money.