Order Types & Executions
You can place orders for stock in the same way you would place an order at a restaurant. You tell your broker what you would like to buy or sell, and your broker facilitates the transaction, if possible. Also like a restaurant, some orders are very simple ('I'll have the veal'), and others are more complex ('I'll have your chopped salad, but only if the chicken is grilled and the dressing is on the side').
Simple trading orders are called basic orders, and more specific orders are called advanced orders. Selecting an order type is an important step in the trading process. Your order type determines how your order will execute, and choosing the right order type for your financial objectives can help you control the impact of price fluctuations and market volatility in your account. Learn more about different order types and how they execute below.
Basic order types allow you to create an order to buy or sell a security under a simple condition, such as 'buy this security at its current market price' or 'buy this security when it reaches a market price of $10 per share.' These order types include market, limit, stop-on-quote, stop-limit-on-quote and trailing stop-on-quote orders.
Advanced order types allow you to create an order to buy or sell a security under one or more conditions, such as 'buy this security when it reaches a market price of $10 per share but only if that price stays below $12 per share.' These order types include conditional, one-cancels-other and one-cancels-all orders.
Understanding why orders execute the way they do is essential to placing orders that match your investment strategy. Learn the ins and outs of different order executions in this section to make sure you're selecting the best order types for your strategy.
Find out the life cycle of a trade in this PDF. See what happens behind the scenes when you decide to place an order.