Different Types of Stock Market Order: Limit, Stop & More

When you start investing or trading in the stock market, one of the first things you need to understand is how to place an order. Every time you decide to buy or sell a stock, you give an instruction, called an order, to your broker. But did you know there are different ways to place these orders? Each type of order works differently and can affect how and when your trade is completed.

Knowing which order to use can make a big difference in your trading experience. In this article, we will explain what an order is in the share market and explore what are the different types of stock market orders that traders and investors commonly use. 

What Is an Order in the Share Market?

An order in the share market is a request you make to buy or sell a security, such as shares of a company. When you invest or trade, you need to tell your broker what stock you want to trade, how many shares you want, and the price you are ready to buy or sell at. 

Orders are placed during a trading session, which usually follows the official timings of the stock exchange. Once your order is placed, it will either get executed right away, wait for the right market conditions, or remain pending until it expires or is cancelled. 

There are different ways to place an order depending on your goals. Sometimes, you might want to buy shares right away, so wait until the stock reaches a specific price, or sell if the price rises or falls to a certain level. That’s why there are different types of orders to help you control when and how your trades happen.

What Are the Different Stock Market Order Types?

In the stock market, placing an order means telling your broker what action you want to take, whether to buy or sell a stock, at what price, and under what conditions. But not every order works the same way. There are different types of stock market orders, each designed to suit different situations and trading goals.

Let’s take a closer look at the most common types of orders used in the stock markets:

1. Market Order

A market order is the simplest type of order. It tells your broker to buy or sell a stock instantly at the current market price. This type of order is used when you want to enter or exit a trade immediately without worrying about small price changes.

For example:

• If you place a market buy order, your shares will be bought at the best available selling price.
• If you place a market sell order, your shares will be sold at the best available buying price.

Market orders are usually executed instantly during market hours. However, you don’t have control over the exact price because stock prices can change within seconds. It’s useful when speed is more important than price.

2. Limit Order

A limit order lets you set a fixed price at which you want to buy or sell a stock. Your order will only be carried out if the market reaches that price or better.

There are two types of limit orders:

• A buy limit order is used when you want to buy shares at or below a certain price.
• A sell limit order is used when you want to sell shares at or above a certain price.

For example, if a stock is trading at ₹120 and you want to buy it at ₹115, you can place a buy limit order at ₹115. The order will only be completed if the stock price drops to ₹115 or lower. Limit orders are helpful when you want more control over the price and are willing to wait. However, if the price never reaches your set level, the order may not get executed.

3. Stop Loss Order

A stop loss order helps protect your investment by reducing potential losses. It is an order to exit the trade when a stock reaches a specific price, called the “stop price.”

There are two main types of stop loss orders:

• A buy stop loss order is placed above the current price to buy the stock if its price starts rising.
• A sell stop loss order is placed below the current price to sell the stock if its price starts falling.

Let’s say you bought a stock at ₹200. To protect yourself from big losses, you can place a sell stop loss order at ₹190. If the price drops to ₹190, it triggers a sale, helping you limit your loss.

There’s also a trailing stop loss order, which automatically adjusts as the stock price moves in your favour. This helps you lock in profits and still have protection against losses.

4. Good Till Triggered Order

A good till triggered (GTT) order is a type of order that stays active until a specific trigger condition is met. It is useful for people who don’t want to track the market every day.

Here’s how it works:

• You set a trigger price and a limit price. Once the trigger price is reached, the order turns into an active order and waits for execution.

For example, if you want to buy a stock only when it drops to ₹500, you can place a GTT buy order. As soon as the stock hits ₹500, your order is triggered and becomes a limit order at your chosen price. GTT orders are helpful for long-term or short-term investors who have a target price in mind but don’t want to sit in front of the screen all day.

5. Day Order

A day order means your order will stay active only during the current trading day. If it doesn’t get completed by the time the market closes, it is automatically cancelled. This applies to market, limit, and stop loss orders. 

For example, if you place a buy limit order at ₹100, and the stock never drops to that price during the day, the order will expire at the end of the session. Day orders are good when you’re looking for short-term trades and want to avoid leaving orders open overnight.

Conclusion

Understanding the different types of stock market orders is key to becoming a successful trader or investor. Each order type has its own purpose and use case. While market orders are fast and simple, limit orders and stop loss orders provide more control and safety. The right type of order can protect your investments and help you make the most of stock market opportunities.

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