What are the different types of Trading Orders in the Indian Stock Market

An investment can’t be done until the investor makes an “ORDER” to the broker. 

The wide and dynamic stock market of India is being developed day by day. The investors now have the opportunity to trade by being at home only. They can make the investment order easily with just a click. But prior to making a step towards investment, it’s good to know about it.

It is essential to understand the different types of trading orders available to make informed decisions and execute trades efficiently. So, let’s understand what trading orders and types of trading orders are available in the Indian stock market.

What is a Stock Order?

Order is a direction given by the investor to the broker for making an action of buying or selling securities on a trading platform as per the command of the investor. Investors or traders can choose different order types as per the stock market.

Order Types can further be divided into:  

A) Types of Orders on the basis of Time Horizon

When we talk about the order on the basis of time horizon there are two types of order 

B) Types of Orders on the Basis of Price

1. Market Order

An order to buy or sell stock at the going rate of the market is referred to as a market order. This type of order is executed immediately, and the investor gets the best available price at the time of execution. These orders are suitable for investors who want to buy or sell stocks quickly without waiting for a specific price.

2. Limit Order

An order to purchase or sell stock at a specific price or higher is known as a limit order. The investor sets a limit price, and the order is executed only if the market price reaches or crosses the limit price. Limit orders are suitable for investors who want to buy or sell stocks at a specific price.

3. VTD Order 

A GTT order, also known as a "Valid Till Date" order, is a form of order that is executed when specific trigger price criteria specified by the user are met. GTT orders, in contrast to other order types, have a validity of one year and are therefore used by investors to set a goal or stop-loss on their current long-term holdings.

C) Types of Orders on the basis of Risk Management

1. Stop Loss Order

A stop-loss order is an order to sell a stock if its price falls below a specified level. This type of order helps investors to limit their losses in case the stock price starts falling rapidly. Stop-loss orders are suitable for investors who want to protect their investments from sudden price drops.

2. Cover Order

A cover order is an order to buy or sell a stock along with a stop-loss order. The investor sets a stop-loss price, and the order is executed only if the market price reaches or crosses the stop-loss price. Cover orders are suitable for investors who want to buy or sell stocks quickly and protect their investments from sudden price drops.

3. Bracket Order

A bracket order or OCO order (one cancels the other)  is a combination of a limit order and a stop-loss order. The investor sets a target price and a stop-loss price, and the order is executed if the market price reaches either of these levels. Bracket orders are suitable for investors who want to buy or sell stocks at a specific price and protect their investments from sudden price drops.

D) Other Important Order 

After Market Order (AMO)

An after-market order is an order placed after the regular trading hours. The order is executed as soon as the market opens on the next trading day. AMO orders are suitable for investors who cannot trade during regular trading hours.

Conclusion 

Understanding the different types of trading orders available in the Indian stock market is crucial for investors to make informed decisions and execute trades efficiently. It is important to choose the right type of order based on the market conditions and investment objectives. Investors should consult with their financial advisors before placing any trading orders to avoid any potential risks.

Frequently Asked Questions 

1. What is an intraday order in the Indian stock market?

Answer: An intraday order is a type of trading order where investors buy and sell securities within the same trading day. These orders are suitable for investors who want to make quick profits by taking advantage of short-term price movements.

2. How does a limit order work in the Indian stock market?

Answer: A limit order is a type of trading order where investors set a specific price at which they want to buy or sell securities. This order is executed only when the market price reaches the specified limit price.

3. What is a GTT order in the Indian stock market?

Answer: A VTD (Valid Till Date) order is a type of trading order where investors set a specific trigger price at which they want to buy or sell securities. This order remains active until the trigger price is reached, even if it takes several days or weeks.

4. How does a stop loss order work in the Indian stock market?

Answer: A stop loss order is a type of trading order where investors set a specific price at which they want to sell their securities to limit their losses. This order is executed automatically when the market price reaches the specified stop loss price.

5. What is a bracket order in the Indian stock market?

Answer: A bracket order is a type of trading order where investors place a combination of two orders - a target order and a stop loss order - simultaneously. This order helps investors to limit their losses and lock in profits by setting a specific target price and stop loss price.