Order Types

Market Order

A market order represents the most basic type of a trade order and implies buying or selling a security at the current price. Securities are bought at the ASK price and sold at the BID price. If the trader needs to get into or out of a trade, a market order is the most reliable method. However, slippage can occur, a trade execution at a less favorable price, thus market orders should only be used to enter trades when there is good liquidity in the market.

Pending orders

A pending order is an order which is executed in the future at a pre-defined price. When price reaches certain level, trade is executed. There are four types of pending orders:

• Buy Limit – a trade request to buy at the “Ask” price that is equal to or less than that specified in the order. After having fallen to a certain level, trader anticipates security price will increase.
• Sell Limit – a trade order to sell at the “Bid” price equal to or greater than the one specified in the order. After having increased to a certain level, trader anticipates security price will fall.
• Buy Stop – a trade order to buy at the “Ask” price equal to or greater than the one specified in the order. The order becomes active only after a specified price level has been reached anticipating that the security price will keep on increasing.
• Sell Stop – a trade order to sell at the “Bid” price equal to or less than the one specified in the order.  Sell Stop becomes active only after a specified price level has been reached anticipating that the security price will keep on falling.

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