Over the last few years, especially after the crash in the stock market because of COVID-19, trading activities have increased considerably. During the market crash, investors with long-term financial goals and objectives stopped their investment activities, whereas day traders continued trading in the share market.
The main reason behind this is that during volatility in the market, it is a good opportunity for day traders to earn good profits. Immediate or Cancel (IOC) in the share market has played an integral role in helping traders capitalise on price movements.
Before you know how to place such an order, scroll below to learn what is IOC in the share market, its features, benefits, and other important details.
IOC Meaning in the Share Market
An IOC stands for Immediate or Cancel Order. This is a specific order that results in immediate execution. If an IOC order is not fulfilled within a particular time frame, it gets cancelled automatically. Because of its ability to ensure smooth transactions without the threat of market fluctuations, these are popular among day traders. IOC orders are also called ‘zero-duration orders’ because of their short execution window.
It is feasible for investors to place IOC in the share market as a market or limit orders. Execution of market order takes place at the current prevailing price in the market. Conversely, a limit order has a set price at which an order should be filled out. But there lies a certain risk that the execution of an order might fail if the price is not reached.
Thus, IOC enables traders to carry out transactions in the market swiftly without the burden of lingering orders. Moreover, each order can be fulfilled partially in the absence of sufficient market demand. This kind of flexibility thereby makes IOC an invaluable tool for day traders for the creation and management of large-size orders.
What are the Features of IOC Order?
Here are some distinguishing features of IOC in the share market:
- Traders who want to buy and sell shares in a hurry without waiting for trade completion consider IOC a convenient option
- The traders can place an IOC order both as a limit or a market order. A market order allows traders to buy and sell shares at the current prevailing price, in contrast to a limit or stop order. Whereas a limit order enables traders to buy and sell securities when the price reaches the desired limit.
- An IOC order is beneficial for investors willing to trade in the share market. Investors can opt for order execution with ease and avoid them if not satisfied with the market conditions.
- An IOC order is beneficial when a trader aims to place a large order, specifically in low-volume stocks.
How can I Place IOC Orders in the Stock Market?
Placing an IOC in the stock market is a simple and straightforward process. Follow the steps below to experience a hassle-free method of placing an IOC order:
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Select a Trading Platform
Before opening your demat and trading account, select a reputable stock broker like Torus Digital, offering low trading charges. Make sure to conduct thorough research about the broker’s services, customer support and online trading platform before proceeding to finalise.
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Make Yourself Educated
After research, collect knowledge regarding different types of orders and their applications. Consider the factors necessary to take into consideration before placing an IOC in the stock market.
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Choose Stocks
Choose the desired stock you want to trade. Before finalising an order, make sure to go through price charts and review the trading history.
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Select the Type of Order
On your chosen trading platform, select “Immediate or Cancel (IOC)” as your order type. In some specific platforms, it is also given as “Fill or Kill (FOK)”. Moreover, while mentioning the order type, make sure to provide the quantity, specific buying and selling order, and price.
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Review Details of Order
Make sure to double-check the details before you finalise and place an order. Also, check if the order type (IOC), symbol of stock, quantity, and price are all provided correctly.
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Confirmation
Once you submit, you will get a confirmation message on the platform confirming the successful placement of an IOC order.
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Execution Monitoring
Visit the trading platform and check to see if the IOC order has been executed properly. You might need to place a new order or make changes in prices to match market conditions if the IOC order is executed partially.
What are the Key Differences between IOC Order and Day Order?
The key differences that exist between an IOC order and a day order include the following:
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Time of Execution
A day order remains open throughout the day and expires automatically at the end if not executed. Whereas, an IOC order requires execution immediately or else the order gets cancelled immediately within seconds.
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Use Cases
Traders who can wait for some time for prices to reach a specific limit prefer day orders. In contrast, traders who are willing to buy and sell shares immediately prefer IOC orders.
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Status of Order
A day order remains on the pending list till the end of trading hours. On the other hand, IOC orders do not linger for long. If there are any unfulfilled portions, they are cancelled immediately.
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Management of Risks
With day orders, there is a certain risk from price movements as orders can be closed off automatically. However, IOC orders mitigate risks as unfilled portions get cancelled immediately and thereby prevent attaining unwanted positions in the market.
Final Words
By now, you must have gained a clear understanding of what is IOC in the share market. If a trader knows how to set an IOC order correctly, this can turn out to be an effective day trading strategy. Traders are allowed to place multiple IOC orders at a time without placing much effort into tracking status for an extended period.
However, the use of IOC orders must be done carefully because there are chances of affecting the investor’s calculation if not placed correctly. To begin using IOC orders, every investor must open a demat account. Get a demat and trading account from Torus Digital to experience a smooth trading journey through our advanced platform.
