One-Cancels-Other (OCO) & One-Cancels-All (OCA) Orders

One-Cancels-Other (OCO) Order is a group of orders that consists of two individual orders; if one of the orders is executed, then the other order will be automatically canceled.

One-Cancels-All (OCA) Order is a group of orders that consists of 2 or 3 individual orders. When any one of the orders in the group fulfils a trigger condition, the triggered order will be sent to the market for execution, whereas the other order(s) will be automatically canceled.
Basically, One-Cancels-Other (OCO) Order and One-Cancels-All (OCA) Order are similar. The difference may be that OCO Order consists of two individual orders in a group, while OCA Order can be made up of 2 or more individual orders in a group.

Generally, the following are some characteristics of One-Cancels-All (OCA) Order:
* Individual orders in one OCA group order can be either stocks or options, and the security type does not need to be consistent across all individual orders in the group. That means you can mix the orders for stocks or options in one OCA group order.
* Once one of order is triggered, the other remaining order(s) in the group will be canceled. The triggered order does not need to be executed for other remaining order(s) to be canceled.
* All orders in an OCA group order will be are held at the brokerage until triggered. Once triggered, the triggered order will be sent to the market as either Market Order or Limit Order as set by the trader/investor.
* If one order is partially filled, the remaining order(s) will be reduced proportionately to the remaining quantity of the unfilled order.
* If one order is canceled by the trader/investor before it gets triggered & executed, all the remaining order(s) will automatically be canceled as well.
* However, if one of the orders is rejected or canceled by the system, the remaining order(s) will NOT be canceled automatically.

Some examples of how you can make use of OCA order:

Example 1:
You want to enter into a long position in either a particular stock or an option in that stock.
You can place a One-Cancels-All (OCA) order that consists of the following orders:
a) Order 1 � Buy stock DEF with Limit Price of $30.00.
At the time you�re placing the order, stock DEF is trading at $32 / share.
b) Order 2 � Buy option DEFJKL of stock DEF with Limit Price of $1.60.
At the time you�re placing the order, Option DEFJKL is trading at $1.80 / contract.

If the price of stock DEF drops to $30.00 before option DEFJKL hits $1.60, Order 1 will be triggered and sent to the market as Buy Limit Order to buy stock DEF at $30.00 or lower. At the same time, Order 2 will be canceled automatically.
On the other hand, if the price of option DEFJKL drops to $1.60 before stock DEF hits $30, Order 2 will be triggered and sent to the market as Buy Limit Order to buy option DEFJKL at $1.60 or lower. At the same time, Order 1 will be canceled automatically.

Example 2:
You�ve own stock OPQ that is currently trading at $25.00. In order to manage the position without having to constantly monitor the market, you want to place Sell Limit Order at $32.00 to lock in profit when the price has reached your Profit Target Price, and Sell Stop Order at $20.00 to limit your losses in case the price moves against your expected direction. When one of the orders is triggered & executed and your position is closed as a result, the other order will be automatically canceled.
Note:
The purpose of the order in this example is actually similar to that of Bracketed Order, which is to allow you lock in profit and limit your losses.
The difference is that in this case, you place the above two opposite orders when you�ve already own the stock; whereas for a Bracketed Order, the above two opposite orders are submitted together with the buy order for opening the position.

Disclaimer:
This order is a more complicated order, not all brokerages can accept this order.
Even the procedures, rules, terms and/or how to place this order may vary from one to another brokerage. Hence, you need to check with your own brokers specifically for the details before placing such order.

For the list of other types of order, go to: Types of Orders in Trading.

Related Topics:
* Free Trading Educational Video: Learn Technical Tips from Dan Gramza
* Option Greek
* Understanding Implied Volatility (IV)
* Understanding Option�s Time Value
* Learning Candlestick Charts
* Learning Charts Patterns

Read more »

Bracketed Order

Bracketed Order allows traders/investors to manage the trade/position by �bracketing" an order for opening a position (i.e. the �main order�) with two opposite �side orders� for closing the position in order to limit losses and lock in profits, without having to constantly follow the position.
The order quantity for the �side orders� matches the original order quantity of the �main order�.

When the Bracketed Order is placed, the trader/investor must determine the corresponding prices for all the 3 component of the Bracketed Order (One �main order� for opening position and two opposite �side orders� that bracketed the �main order� for closing the position).
When one of the side orders is being executed, the other side of the order will automatically be cancelled.

Depending on the �main order� for opening a position, there are 2 types of Bracketed Orders:

1) BUY ORDER
The Buy Order will open the position by buying a security.
The price for the Buy Order can be set as a Market Order (to buy at the market price) or Limit Order (to buy at the Limit Price or lower).
The Buy Order will then be bracketed by:
a) Sell Limit Order: The Limit Price to sell should be above the Buy Order�s Price.
This Sell Limit Price serves as Profit Target in order to lock in profits.
b) Sell Stop Order: The Stop Price should be below the Buy Order�s Price.
This order serves to limit losses.
Other than Sell Stop Order, you can also use Sell Stop Limit Order or Sell Trailing Stop Order for this purpose.

2) SELL ORDER
The Sell Order will open the position by selling a security.
The price for the Sell Order can be set as a Market Order (to sell at the market price) or Limit Order (to sell at the Limit Price or higher).
The Sell Order will then be bracketed by:
a) Buy Limit Order: The Limit Price to buy should be lower the Sell Order�s Price.
This Buy Limit Price serves as Profit Target in order to lock in profits.
b) Buy Stop Order: The Stop Price should be above the Sell Order�s Price.
This order serves to limit losses.
Other than Buy Stop Order, you can also use Buy Stop Limit Order or Buy Trailing Stop Order for this purpose.

Example 1:
You place a Sell Order for Stock STU at the price of $20, along with a Buy Limit Order with Limit Price of $15 and a Buy Stop Order with Stop Price of $25.

If the price falls to $15 or lower (and never go up touching the Stop Price at $25), the Buy Limit Order will be triggered and sent to market to buy back the shares at $15 or lower. You will then realize at least $5 profit. In this case, the Buy Stop Order at $25 will automatically be cancelled.

If the price increases to $25 or higher (and never go down touching the Sell Limit Price at $15), the Buy Stop Order will be triggered and sent to market to buy back the shares at the market price. You will then realize at least $5 losses. In this case, the Buy Limit Order at $15 will automatically be cancelled.

Example 2:
You place a Buy Order Call Options of DEF at the price of $3.00, along with a Sell Limit Order with Limit Price of $4.00, and a Sell Trailing Stop Order with Trailing Amount of $0.50.
Since the current option premium is $3.00, the Initial Stop Price will be $2.50 (= $3.00 - $0.50).

If the option premium increases to $4.00 or higher, the Sell Limit Order will be triggered and sent to market to sell the options at $4.00 or higher. You will then realize at least $1.00 profit. In this case, the Trailing Stop Order will automatically be cancelled.

If the option premium increases to $3.20 first, that it starts to fall. In this case, the Stop Price would reset to $2.70 (= $3.20 - $0.50). It the premium continues to drop and pass $2.70 (the new Stop Price), the Sell Stop Order will be triggered and sent to market to sell the shares at the market price. You will then realize at least $0.30 losses. In this case, the Sell Limit Order at $4.00 will automatically be cancelled.

Advantage & Disadvantage of Bracketed Order:
The advantage of Bracketed Order is that it allows the trader/investor to manage the trade without having to constantly follow the position. They also can control how much they�re willing to lose and determine what the Profit Target Price is, based on their planned risk/reward ratio. Hence, this can help take some emotions out of your trading decision.

However, the disadvantage of Bracketed Order is that since you place a limit on how much profit you want to make, you might potentially �lose money� should the price continues to move to your expected direction. In order words, you could not let the profits run using this kind of order.

Disclaimer:
This order is a more complicated order, not all brokerages can accept this order.
Even the procedures, rules, terms and/or how to place this order may vary from one to another brokerage. Hence, you need to check with your own brokers specifically for the details before placing such order.

For the list of other types of order, go to: Types of Orders in Trading.

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Conditional / Contingent Order � Part 2: Examples

Go back to Part 1: How It Works.

Examples of Conditional / Contingent Orders:

Example 1:
Stock XYZ has been trading in a range between $30.00 and $35.00. You want to place a buy order to buy the shares of XYZ when the stock has broken out the range and show upward price movement. You can place a contingent order and set a condition that when the price is trading at $35.20 or above (Trigger Price >= $35.20), place an order to buy XYZ at $35.30 (i.e. Limit Order with Limit Price $35.30).
Suppose when the market opens the next day, XYZ opens at $35.25, the order will be triggered and sent to the market as a Limit order. The order should be executed at a price around $35.25. Basically, the order will only be filled with the price $35.30 or lower.
However, suppose stock XYZ opens at $40.00, the order will be triggered, but it won�t be executed as the price is higher than the Limit Price. Hence, this can prevent you from buying more than the price that you�re willing to pay.

Example 2:
Adding to Example 1, suppose that in order to ensure that there is also sufficient momentum leading to the price breakout of the trading range, you also want to specify a minimum volume target of 300,000 units traded.
In this case, if the price increase to $35.20 or above, but only 200,000 units are traded that day, then your order will not be triggered.
Only when both the price is $35.20 or above AND the volume traded on that day (i.e. all units traded on the day the price is traded at $35.20 or above, including units traded at both above and below $35.20) is 300,000 units or more, the Limit order to buy stock XYZ at the price $35.30 or below will then be triggered and submitted to the market.

Example 3:
You own Call option contracts of stock ABC and would like to sell the options if a certain market index falls below 10,000. You can place a contingent order and specify a condition that if the market index drops to below 10,000, your order to sell will be triggered and sent to the market.
In this case, you can choose to have Market Order, Limit Order, Stop Order, or Stop Limit Order to be sent to the market when the condition is met.
Remember that since the security you will be selling is options, when you place Limit Order, Stop Order, or Stop Limit Order, the Limit Price or Stop price you specify must be the options premium, not the stock price.

Example 4:
You�ve observed that normally when stock price of ABC drops, stock XYZ would also drop shortly after. Currently, stock ABC is trading in the range of $15 to $18. You expect that the stock ABC will fall and break down the trading range. When that happens, you wish to buy Put options of stock XYZ.
You can place a contingent order and set a condition that if the stock price of ABC falls to or below $14.80, your order to buy Put options of XYZ will be triggered.
Likewise, you can choose to have Market Order, Limit Order, or even Buy Market-If-Touched (Buy MIT) or Buy Limit-If-Touched (Buy LIT) Order (if available) to be sent to the market when the condition is met.

Example 5:
You have short sell stock PQR at $20.00 and wish to buy it back to take profit when the price has fallen to $18.00 (your profit target). In addition to the price condition, you also want to set a minimum traded volume before the order can be triggered.
For this purpose, you can place a contingent order and set a condition that if the stock price of PQR has fallen to 18.00 or below and at least 100,000 units of PQR are traded, your order to buy (back) the stock will be triggered. You can choose to have Market Order, Limit Order, Stop Order, or Stop Limit Order to be sent to the market when the condition is met.
In this case, if the price falls to $18.00 or below but only 90,000 units are traded that day, then your order will not be triggered.
Only when both the price is $18.00 or below AND the volume traded on that day (i.e. all units traded on the day the price is traded at $18.00 or below, including units traded at both above and below $18.00) is at least 100,000 units, the order will be triggered and submitted to the market.

For the list of other types of order, go to: Types of Orders in Trading.

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Conditional / Contingent Order � Part 1: How It Works

Conditional / Contingent Order is an order with sets of criteria attached (specified by the trader / investor placing the order), which will automatically be submitted to the market if the predetermined sets of criteria are met.

How Conditional / Contingent Order Works
Conditional / Contingent Order can be specified as a Market Order or Limit Order.
You can then set one or more conditions attached to the order, and normally the condition is set in terms of price and/or volume.
You can also specify those conditions for stock, option or combination orders, and use many different triggers (e.g. the price and/or volume of the security being traded and/or another security, including security index).

When you are setting condition in terms of Price & Volume, for the order to be sent to the market, not only the price must pass the preset trigger price, but also the trading volume must also exceed certain target.
Hence, volume condition serves as additional safeguard in order to avoid an order being sent to market without sufficient momentum (e.g. when the price is trading at just slightly outside your trigger price but only in small volume, which does not really indicate a significant market sentiment change).

For Volume condition, the Volume Target (i.e. the units traded limit) will consider all units traded on the day the price condition is met, including units traded at both above and below the condition price / Trigger Price.

Therefore, if you enter a Volume condition, your Conditional Order would only be triggered and submitted once the Price Trigger has been passed and your Volume Target has been reached both on the same day.

Note:
As Conditional / Contingent Order is a more complicated order, not all brokerages can accept this order.
Even the procedure or rules of how to place a Conditional / Contingent Order may vary from one to another brokerage. Some brokerages may also only allow setting conditions for prices, but not volume.
Hence, you need to check with your own brokers specifically how to do it.

Normally, you are allowed to amend or cancel a conditional / contingent order any time before the conditions you have set are met. However, once the conditions have been met and the order has been triggered, it is not possible to cancel the conditional / contingent order.

Continue to Part 2: Examples

For the list of other types of order, go to: Types of Orders in Trading.

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Trailing Stop Limit Order

Trailing Stop Limit Order is similar to Trailing Stop Order, whereby the Trailing Stop Price will be �trailing� below or above the movement of the security�s market price, depending on whether it is on a long or short position, to maintain the set distance, which is either stipulated as an absolute dollar or as a percentage of the market price.

The main difference is that for Trailing Stop Limit Order, when the Stop Price is passed, the order will be converted into a Limit Order, whereas for Trailing Stop Order, it�ll convert into a Market Order.

Hence, for Trailing Stop Limit Order, when the market price hits or passes the Stop Price, the order would convert into a Limit Order to buy / sell the security at the specified Limit Price or better.

As a result, Trailing Stop Limit Order carries a big risk, as the order may never get filled if the market price is worse than the Limit Price. As a result, the position can continue falling with no more protection for the position. This makes Trailing Stop Limit Order a very insecure stop loss method, particularly for the extremely volatile stocks that often experience a gap up or gap down in prices.
Due to this risk, using Trailing Stop Limit Order to protect a position is not advisable.

Depending on the position on the market you have (long or short), there are 2 types of Trailing Stop Limit Order:
a) Sell Trailing Stop Limit Order (Trailing Stop Limit to Sell)
This is the trailing stop order when you have a long position on a security.
In this case, the Trailing Stop Price is placed at a set distance (e.g. Trailing Amount) below current market price of the security.
In addition, the Trailing Limit Price will also need to be specified as a certain distance (e.g. Limit Offset) from the Stop Price, whereby the Limit Price should be at a least the same or lower than the Stop Price.

The Stop Price will then rise as the market price increases (i.e. The Stop Price will be trailing the increasing market price from below: Stop Price = Increasing Market Price � Trailing Amount).
However, the Stop Price will remain the same (will not go lower) when the market price decreases.
Once the market price hits or passes Stop Price, the order would convert into a Limit Order to sell the security at the Limit Price (Limit Price = Stop Price � Limit Offset) or better (i.e. at Limit Price or higher, because for selling, the higher the price, the better).

b) Buy Trailing Stop Limit Order (Trailing Stop Limit to Buy)
This is the trailing stop order when you have a short position on a security.
In this case, the Trailing Stop Price is placed at a set distance (e.g. Trailing Amount) above current market price of the security.
In addition, the Trailing Limit Price will also need to be specified as a certain distance (e.g. Limit Offset) from the Stop Price, whereby the Limit Price should be at a least the same or higher than the Stop Price.

The Stop Price will then move lower as the market price decreases (i.e. The Stop Price will be trailing the decreasing market price from above: Stop Price = Decreasing Market Price + Trailing Amount).
However, the Stop Price will remain the same (will not go higher) when the market price increases.
Once the market price hits or passes Stop Price, the order would convert into a Limit Order to buy the security at the Limit Price (Limit Price = Stop Price + Limit Offset) or better (i.e. at Limit Price or lower, because for buying, the lower the price, the better)

Note:
When placing Trailing Stop Limit Order for an Option, the order will be triggered based on the market price of the option, NOT the market price of the underlying stock. Therefore, the Stop Price should be set based on the option�s price as well.

Therefore, just remember how the price of Call and Put options are related to the underlying stock price:
For a Call option, the option�s price increases when the underlying stock�s price increases, and decreases when the underlying stock�s price decreases (positive relationship).
On the other hand, for a Put option, the option�s price increases when the underlying stock�s price decreases, and decreases as the underlying stock�s price increases (negative relationship).

Example:
Suppose the stock price ABC is on a downtrend. You expect that the stock price ABC will continue to drop further. To take advantage of this opportunity, you short-sell the stock at $20, and place a Buy Trailing Stop Limit order with Trailing Amount = $0.3 and Limit Offset = $0.2.
In this case, the initial Buy Stop Price will be $20.3 and the initial Limit Price is 20.5.
When the stock price falls to $19, the Buy Stop Price will adjust accordingly to $19.3 and Limit Price to $19.5.
If the stock price continues to drop further to $18, the Buy Stop Price will adjust to $18.3 and Limit Price to $18.5.
Suddenly, the stock price stops to drop and begins to increase. In this case, the Buy Stop Price will remain at $18.3. Once the Stop Price of $18.3 is hit, the order will convert into a Limit Order to buy back the stocks at the price $18.5 or lower.
As with the risk of Stop Limit Order, this order may never get filled if the market price is worse than the Limit Price. Hence, the position can continue falling with no more protection for the position.
In this example, suppose the stock price gaps up to $17 and continue to increase, the order will never get filled. This makes Trailing Stop Limit Order a risky method for protecting a position / taking profit, and hence not advisable.

For the list of other types of order, go to: Types of Orders in Trading.

Related Topics:
* Free Trading Educational Video: Learn Technical Tips from Dan Gramza
* Option Greek
* Understanding Implied Volatility (IV)
* Understanding Option�s Time Value
* Learning Candlestick Charts
* Learning Charts Patterns

Read more »

Trailing Stop Order

Trailing Stop Order is a Stop Order that continually adjusts the Stop Price as the market price of the security moves (i.e. trailing the security�s market price).
The Trailing Stop Price is placed at a set distance (either as an absolute dollar or as a percentage of the market price) below or above the market price, depending on whether it�s on a long or short position.
The Trailing Stop Price will then adjust as the market price of the security moves, maintaining the set distance.

If the market price hits or passes through the Stop Price, the order would convert into a Market Order, and will be filled at the best available price in the market at that time.
The same advantage & disadvantage of Market Order apply to Trailing Stop Order as well.

The advantage of Trailing Stop Order is that it can allow traders/investors to let the profits run (as long as the price does not fall to the Stop Price), while at the same time, limit the losses without continually having to adjust and place new Stop Loss orders.

Depending on the position on the market you have (long or short), there are 2 types of Trailing Stop Order:
a) Sell Trailing Stop Order (Trailing Stop to Sell)
This is the trailing stop order when you have a long position on a security.
In this case, the Trailing Stop Price is placed at a set distance (either as an absolute dollar or as a percentage of the market price) below current market price of the security.

The Stop Price will then rise as the market price increases (i.e. The Stop Price will be trailing the increasing market price from below: Stop Price = Increasing Market Price � Trailing Amount).
However, the Stop Price will remain the same (will not go lower) when the market price decreases.
Once the market price hits or passes through Stop Price, the order would convert into a Market Order to sell the security at the best available price in the market at that time.

b) Buy Trailing Stop Order (Trailing Stop to Buy)
This is the trailing stop order when you have a short position on a security.
In this case, the Trailing Stop Price is placed at a set distance (either as an absolute dollar or as a percentage of the market price) above current market price of the security.

The Stop Price will then move lower as the market price decreases (i.e. The Stop Price will be trailing the decreasing market price from above: Stop Price = Decreasing Market Price + Trailing Amount).
However, the Stop Price will remain the same (will not go higher) when the market price increases.
Once the market price hits or passes through Stop Price, the order would convert into a Market Order to buy the security at the best available price in the market at that time.

Note:
When placing Trailing Stop Order for an Option, the order will be triggered based on the market price of the option, NOT the market price of the underlying stock. Therefore, the Stop Price should be set based on the option�s price as well.

Therefore, just remember how the price of Call and Put options are related to the underlying stock price:
For a Call option, the option�s price increases when the underlying stock�s price increases, and decreases when the underlying stock�s price decreases (positive relationship).
On the other hand, for a Put option, the option�s price increases when the underlying stock�s price decreases, and decreases as the underlying stock�s price increases (negative relationship).

Example � Trailing Stop as an Absolute Dollar:
Suppose the stock price ABC is on a downtrend. You expect that the stock price ABC will continue to drop further. You bought Put option contracts of that stock at $3/contract, and place a Sell Trailing Stop order, with an absolute Trailing Amount at $0.5. That means the initial Stop Price is set at $2.5.
When the stock price ABC is falling and, as a result, the price of the Put option has increased to $4, the Stop Price will adjust accordingly to $3.5.
If the stock price ABC continues to drop further, and the price of the Put option then rises to $5, the Stop Price will adjust to $4.5.
Suddenly, the stock price ABC stops to drop and begins to increase. Consequently, the Put option�s price will drop. In this case, the Stop Price will remain at $4.5.
Once the Stop Price of $4.5 is hit, the order will convert into a Market Order to sell the Put option contracts at the best available price in the market at that time.

Example � Trailing Stop as a Percentage:
Similar as above, except that you place a Sell Trailing Stop order as Trailing Percentage at 20%.
In this case, the initial Stop Price will be set at $2.4 (= 3 � 20% x 3 = 3 � 0.6).
When the stock price ABC is falling and, as a result, the price of the Put option has increased to $4, the Stop Price will adjust accordingly to $3.2 (=4 � 20% x 4 = 4 � 0.8).
If the stock price ABC continues to drop further, and the price of the Put option then rises to $5, the Stop Price will adjust to $4 (= 5 � 20% x 5 = 5 � 1).
Suddenly, the stock price ABC stops to drop and begins to increase. Consequently, the Put option�s price will drop. In this case, the Stop Price will remain at $4.
Once the Stop Price of $4 is hit, the order will convert into a Market Order to sell the Put option contracts at the best available price in the market at that time.

As you can see here, when setting Trailing Stop as a percentage, the Trailing Amount will get bigger as the Market Price of the security increases.
On the other hand, when setting Trailing Stop as an absolute dollar, the Trailing Amount will remain the same.

For the list of other types of order, go to: Types of Orders in Trading.

Related Topics:
* Free Trading Educational Video: Learn Technical Tips from Dan Gramza
* Option Greek
* Understanding Implied Volatility (IV)
* Understanding Option�s Time Value
* Learning Candlestick Charts
* Learning Charts Patterns

Read more »

Stop Limit Order

Stop Limit Order is an order (buy/sell) to close a position that only executes when the current market price of an option/stock hit or passes through a predetermined price (i.e. Stop Price).
Once the Stop Price is passed, the Stop Order becomes a Limit Order, and can only be executed at a specific price (i.e. Limit Price) or better.

As you may have noticed, Stop Limit Order is almost similar to Stop Order. The main difference is that in Stop Limit Order, when the Stop Price is passed, the order will be converted into a Limit Order, whereas for Stop Order, it�ll convert into a Market Order.

Depending on the position on the market you have (long or short), there are 2 types of Stop Limit Order:
a) Sell Stop Limit
This is the stop limit order when you have a long position on a security.
In this case, the Stop Price is placed below current market price of the security, and the Limit Price should be placed at least the same as or lower than the Stop Price.

b) Buy Stop Limit
This is the stop limit order when you have a short position on a security.
In this case, the Stop Price is placed above current market price of the security, and the Limit Price should be placed at least the same as or higher than the Stop Price.

Characteristic & Risk of Stop Limit Order:
Stop Limit Order will remain inactive until the Stop Price is passed. Once the Stop Price is passed, the order will be activated as a Limit Order to buy/sell at the specified Limit Price or better.
Therefore, the advantage of Stop Limit Order is that it provides control over the price at which the order will get filled (i.e. at the Limit Price or better).
However, the disadvantage is that a Stop Limit Order may never get filled if the market price is worse than the Limit Price. As a result, the position can continue falling with no more protection for the position. This makes a Stop Limit Order a very insecure stop loss method, particularly for the extremely volatile stocks that often experience a gap up or gap down in prices.
Due to this risk, using Stop Limit Order to protect a position is not advisable.

Example:
Suppose a Sell Stop Limit order were placed to protect a long position on an option with a Stop Price at $2/contract and Limit Price at $1.5. The current market price is $2.5/contract.
This order would remain inactive, unless the price reaches or drops below $2. When that happens, the order would then turn into a Limit Order.
As long as the order can be filled at $1.5 or higher, the order will be filled.
However, in case the market price gap down at $1 and then continue to fall, the order will not be filled.

The Difference between Stop Limit Order and LIT Order:
Stop Limit Order is actually quite similar to Limit-If-Touched (LIT) order.
The difference between Stop Limit Order and LIT order is basically on the placement of predetermined price that triggers its execution (i.e. �Stop Price� for Stop Limit Order and �Trigger Price� for LIT Order) and Limit Price relative to the current market price.

* For Sell order, the Stop Price & Limit Price for a Sell Stop Limit Order are placed below the current market price, whereas the Trigger Price & Limit Price for a Sell LIT Order are placed above the current market price.

* For Buy order, the Stop Price & Limit Price for a Buy Stop Limit Order are placed above the current market price, whereas the Trigger Price & Limit Price for a Buy LIT Order are placed below the current market price.

For the list of other types of order, go to: Types of Orders in Trading.

Related Topics:
* Free Trading Educational Video: Learn Technical Tips from Dan Gramza
* Options Trading Basic � Part 1
* Options Trading Basic � Part 2
* Understanding Implied Volatility (IV)
* Option Greek
* Understanding Option�s Time Value
* Learning Candlestick Charts
* Learning Charts Patterns
* Getting Started Trading

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Difference between STOP Order and Market-If-Touched (MIT) Order

Stop Order is actually quite similar to Market-If-Touched (MIT) order.
The difference between Stop Order and MIT order is basically on the placement of predetermined price that triggers its execution (i.e. �Stop Price� for Stop Order and �Trigger Price� for MIT Order) relative to the current market price of the security.

* For Sell order, the Stop Price for a Sell Stop Order is placed below the current market price of the security, whereas the Trigger Price for a Sell MIT Order is placed above the current market price of the security.
Note:
Sell Stop Order is a normally used for "Sell To Close� order, which is a order to sell to close the long position you previously entered.
Sell MIT Order is a normally used for �Sell To Open� order, which is a order to sell in order to open/enter a short position.

* For Buy order, the Stop Price for a Buy Stop Order is placed above the current market price of the security, whereas the Trigger Price for a Buy MIT Order is placed below the current market price of the security.
Note:
Buy Stop Order is a normally used for �Buy To Close� order, which is a order to buy to close the short position you previously entered.
Buy MIT Order is a normally used for �Buy To Open� order, which is a order to buy in order to open/enter a long position.


















For the list of other types of order, go to: Types of Orders in Trading.

Related Topics:
* A Chance to Learn from World Class Trading Experts For FREE You Should Not Miss
* Options Trading Basic � Part 1
* Options Trading Basic � Part 2
* Learning Candlestick Charts
* Learning Charts Patterns

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Stop Order

Stop Order is an order (buy/sell) to close a position that only executes when the current market price of an option/stock hit or pass through a predetermined price (i.e. Stop Price).
Once the Stop Price is passed, the Stop Order would convert into a Market Order, and will be filled at the best available price in the market at that time.
Stop Order is also known as Stop Loss Order or Stop Market Order.

Stop Order is commonly used to limit / reduce losses on a position when the price moves sharply against the trader/investor, or to lock in profit from a position to prevent you from �giving your profit back to the market�.

Depending on the position on the market you have (long or short), there are 2 types of Stop Order:
a) Sell Stop Order
This is the stop order (to limit losses or to lock in profit) when you have a long position on a security.
In this case, the Stop Price is placed below current market price of the security.

b) Buy Stop Order
This is the stop order (to limit losses or to lock in profit) when you have a short position on a security.
In this case, the Stop Price is placed above current market price of the security.

Note:
When placing Stop Order for an Option, the order will be triggered based on the market price of the option, NOT the market price of the underlying stock. Therefore, the Stop Price should be set based on the option�s price as well.

Therefore, just remember how the price of Call and Put options are related to the underlying stock price:
For a Call option, the option�s price increases when the underlying stock�s price increases, and decreases when the underlying stock�s price decreases (positive relationship).
On the other hand, for a Put option, the option�s price increases when the underlying stock�s price decreases, and decreases as the underlying stock�s price increases (negative relationship).

Characteristic & Risk of Stop Order:
Stop Order will remain inactive until the Stop Price is passed. Once the Stop Price is passed, the order will be activated as a Market Order.
Therefore, the disadvantage of Stop Order is that while it guarantees execution, the order cannot guarantee that it can be filled at the specified price.
Basically, once the Stop Order has been triggered (i.e. when the price hits or passes through the Stop Price), it turns into a Market Order, which will be filled at the best available price in the market at that time.
This price may be �worse� than the predetermined Stop Price (i.e. lower for Sell Stop, or higher for Buy Stop), particularly during volatile price movement.
Hence, basically the same advantage & disadvantage of Market Order apply to Stop Order as well.

Example:
Suppose a Sell Stop order were placed to protect a long position on a Call option with a Stop Price at $2/contract. The current market price is $2.5/contract. This order would remain inactive, unless the price reaches or drops below $2. When that happens, the order would then be triggered and turn into a Market Order, and the option will be sold at the best available market price.
Hence, in case the market price gap down at $1, the price at which the order will get filled would be around that price, which is much worse than the stipulated Stop Price.

For the list of other types of order, go to: Types of Orders in Trading.

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Limit-If-Touched (LIT) Order

Limit-If-Touched (LIT) is an order to buy / sell a security when the market reaches / touches a predetermined price level (i.e. Trigger Price) that is lower than current price for buy order, or higher than current price for sell order. This order is held in the system until the Trigger Price is touched. Once Trigger Price is touched, the order will be submitted as a Limit Order to buy / sell at the specified Limit Price or better.
The same advantage & disadvantage of Limit Order apply to LIT Order as well.

There are 2 types of LIT Order:
a) Buy Limit-If-Touched (Buy LIT) order is an order to buy a security at Limit Price or better (i.e. at Limit Price or lower for a buy order) if the market price of the security goes down to the Trigger Price, which is lower than current market price of the security.
Once the Trigger Price is touched, the order will turn to a Limit Buy Order, to buy at the predetermined Limit Price or lower.
The Limit Price should be set at least the same as or lower than the Trigger Price.

b) Sell Limit-If-Touched (Sell LIT) order is an order to sell a security at Limit Price or better (i.e. at Limit Price or higher for a sell order) if the market price of the security goes up to the Trigger Price, which is higher than current market price of the security.
Once the Trigger Price is touched, the order will turn to a Limit Sell Order, to sell at the predetermined Limit Price or higher.
The Limit Price should be set at least the same as or higher than the Trigger Price.

Example:
A trader identifies an ascending triangle pattern in Stock ABC. He believes that if the price rises and breaks a certain price benchmark (i.e. the breakout level of the ascending triangle pattern), it will continue to increase further. However, he also expects that the stock will make pullback first to the breakout level before continuing its upward movement.

Suppose that the breakout price is $80. The stock has already broken out that level, and is currently trading at $82. The trader wants to enter into a long position to buy only if the price makes a pullback to the breakout level. However, he also wants to enter at a slightly better price than that, and also does not want to carry a risk of entering at uncertain price.
He then submits a Buy LIT order with a Trigger Price at $80 (lower than current price of $82) and Limit Price at $79.90. His order will remain in the system until the Trigger Price is touched. If the stock does make a pullback and touches $80, the order will then be submitted as a Limit Order to buy the stock at $79.90 or lower. If the market price never goes down to $79.90 or lower, his order will not be executed.

For the list of other types of order, go to: Types of Orders in Trading.

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Market-If-Touched (MIT) Order

Market-If-Touched (MIT) is an order to buy / sell a security when the market reaches / touches a predetermined price level (i.e. Trigger Price) that is lower than current price for buy order, or higher than current price for sell order.
This order is held in the system until the Trigger Price is touched. Once Trigger Price is touched, the order will be submitted as a Market Order to buy / sell at the best available market price.
The same advantage & disadvantage of Market Order apply to MIT Order as well.

There are 2 types of MIT Order:

a) Buy Market-If-Touched (Buy MIT) order is an order to buy a security at the best available price if the market price of the security goes down to the Trigger Price, which is lower than current market price of the security.
Once the Trigger Price is touched, the order will turn to a Market Buy Order, to buy at the best available market price.

b) Sell Market-If-Touched (Sell MIT) order is an order to sell a security at the best available price if the market price of the security goes up to the Trigger Price, which is higher than current market price of the security.
Once the Trigger Price is touched, the order will turn to a Market Sell Order, to sell at the best available market price.

Example:
A trader identifies an ascending triangle pattern in Stock ABC. He believes that if the price rises and breaks a certain price benchmark (i.e. the breakout level of the ascending triangle pattern), it will continue to increase further. However, he also expects that the stock will make pullback first to the breakout level before continuing its upward movement.

Suppose that the breakout price is $80. The stock has already broken out that level, and is currently trading at $82. The trader wants to enter into a long position to buy at any market price, only if the price makes a pullback to the breakout level. He then submits a Buy MIT order with a Trigger Price at $80 (lower than current price of $82). His order will remain in the system until the Trigger Price is touched. If the stock does make a pullback and touches $80, the order will then be submitted as a Market Order to buy the stock at the prevailing market price at that time.

For the list of other types of order, go to: Types of Orders in Trading.

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Fill-Or-Kill (FOK), Immediate-Or-Cancel (IOC) & All-Or-None (AON) Orders

The following are types of orders with attached conditions related to the ability of the broker to fulfill the quantity / size of the orders and timing of execution:

Fill-Or-Kill (FOK)
Fill-Or-Kill (FOK) order is an order (buy / sell) that must be immediately filled entirely (usually within a few seconds) at the limit price or better; otherwise, it will be totally cancelled. So, this order does not allow partial execution.

FOK orders are normally used by day traders who are hoping to scalp or take advantage of the opportunity in the market within a short duration.

Immediate-Or-Cancel (IOC)
Immediate-Or-Cancel (IOC) order is an order that must be filled immediately at the limit price or better only. If the order cannot be filled immediately or fully (i.e. only partially filled), the unfilled portion will be cancelled.

This order is different from Fill-Or-Kill (FOK) order whereby this order allows partial filling, while Fill-Or-Kill (FOK) order does not allow partial filling.

All-Or-None (AON)
All-Or-None (AON) order is an order (buy / sell) that instruct the broker to either fill the order entirely at once at the limit price or better, or do not fill it at all.

The difference between All-Or-None (AON) order and Fill-Or-Kill (FOK) / Immediate-Or-Cancel (IOC) orders is that, unlike FOK / IOC order, AON order will not be cancelled if it cannot be filled immediately, and can be used in addition to Day Order or Good Till Cancelled (GTC) order.
If the order is a Day Order, when there is not enough supply to meet the quantity requested by the order at the limit price or better, then the order will be cancelled at the close of the trading day.

For the list of other types of order, go to: Types of Orders in Trading.

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Day Order, Good Till Cancelled (GTC) Order & Good Till Date (GTD) Order

The following are types of orders related to the TIMING / DURATION of the Order in which the order will still be active / valid before it gets executed:

Day Order
A Day Order is an order that expires automatically after the end of the trading day (when market closes) if the order is not filled yet during the trading hours of the day.
Day Order is normally set as a default order, unless you set your order with other types of order.

Good Till Cancelled (GTC) Order
Good Till Cancelled (GTC) Order is an order that remains valid until you manually cancel it or until the order is filled. This kind of order does not expire automatically at the end of the day.

Brokerages would normally limit the maximum time for an order to be active up to 90 days. GTC order is normally used for entry order using Limit Order.
However, GTC order is also more common to be used for exit orders for setting stop loss or profit taking orders that can last for several days, weeks or even months.

Good Till Date (GTD) Order
Good Till Date (GTD) Order is an order that remains valid until the close of the market on the date specified, or until the order is filled.

For the list of other types of order, go to: Types of Orders in Trading.

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Iceberg Order

Iceberg Order is an order (generally a large volume order) that allows the trader to disclose only a small part of the order, leaving a large undisclosed quantity to be �hidden� from the public, for the purpose of hiding the actual quantity of the order.

This order is normally used by institutional investors when they need to buy / sell large amounts of securities for their portfolio.
In this case, they can divide their large orders into smaller portions (usually by the use of an automated program), so that the public can only see a small part of the order at a time (just as the 'tip of the iceberg' is the only visible portion of a huge mass of ice).
When the disclosed portion has been filled and �the amount of order� has decreased to zero, the displayed portion of the Iceberg Order will then refresh automatically to display the original disclosed amount again. This process will repeat as necessary until the entire balance of the order is executed.

The purpose of hiding its large size using this technique is to reduce the price movements due to substantial changes in a security's supply and demand.

For the list of other types of order, go to: Types of Orders in Trading.

Useful Info:
Also, look into surety bonds. They are a great way to "insure" your performance!

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Market-To-Limit (MTL) Order

Market-to-Limit (MTL) Order is an order that is submitted as a Market Order and will be executed at the prevailing best market price. If the order is only partially filled, the remainder of the order will be cancelled, and then will be re-submitted as a Limit Order, with the Limit Price equal to the price at which the filled portion of the order was executed. If the prevailing price never reaches that Limit Price or better again, the remaining of the order will not be executed.

This type of order is trying to combine the advantages of both market & limit order.
MTL order would ensure execution for at least a portion of the order, while at the same time, avoiding the risk of getting filled at the price that is too far away from the last-traded price for the remaining portion of the order.

Example:
Stock ABC is currently traded at $20.05. A trader wants to 500 shares of ABC by submitting a MTL order. Immediately after order submission, 300 shares are filled at $20.08. The remaining of the order (200 shares) will be cancelled and immediately resubmitted as a Limit Order, and the Limit Price will automatically be set at $20.08. If the prevailing market price has moved up and never reaches that Limit Price or better again, the remaining of the order will not be executed.

For the list of other types of order, go to: Types of Orders in Trading.

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Limit-On-Open (LOO) Order

Limit-On-Open (LOO) is an order that is automatically submitted as a Limit Order (i.e. to buy/sell at the Limit Price or better) at the opening of the market, and to be executed as soon as possible after the market opening only if the price during the opening period is at or better than the Limit Price. Otherwise, the order will be cancelled.

As with limit order, while Limit-On-Open (LOO) order can be filled at the Limit Price or better, it does not guarantee a fill.

LOO order is useful when traders find that the opening price of a certain security has historically proven to be the best price of the day (i.e. the opening price is the highest for sell order, or lowest for buy order), but still want to have control over the price at which the order will be filled to ensure that the execution price is still within their comfortable / acceptable limit.

For the list of other types of order, go to: Types of Orders in Trading.

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Market-On-Open (MOO) Order

Market-On-Open (MOO) is an order that is automatically submitted as a Market Order (i.e. to buy/sell at the market price) at the opening of the market, and to be executed as soon as possible after the market opening at a price within the opening range of prices.

Hence, MOO order can only be executed during the exchange-specified opening period at a price within the opening range of prices; otherwise the order will be cancelled.
However, the execution price does not necessarily need to be the opening price (the first price traded), or to be guaranteed as the best price in that range.

As with market order, while Market-On-Open (MOO) order guarantees an execution, it cannot guarantee the price at which your order will be filled.

MOO order is useful when traders find that the opening price of a certain security has historically proven to be the best price of the day (i.e. opening price is the highest for sell order, or lowest for buy order) and then decided to buy/sell at any price available during this opening period.

For the list of other types of order, go to: Types of Orders in Trading.

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Limit-On-Close (LOC) Order

Limit-On-Close (LOC) is an order to be executed as a Limit Order (i.e. to buy/sell at the Limit Price or better) as close as possible to the market close.
Hence, Limit-On-Close order will be executed at or near the closing price, only if the price is at or better than the Limit Price. Otherwise, the order will be cancelled.

Similar to Market-On-Close (MOC) order, for this order, the broker normally set a time deadline for LOC order submission for that day, which is well before the closing of the trading day. After this submission time deadline, the broker will not accept any more LOC order, and the traders also cannot cancel the submitted LOC order for that day.

As with limit order, while Limit-On-Close order can be filled at the Limit Price or better, it does not guarantee a fill.

LOC order is useful when traders find that the closing price of a certain security has historically proven to be the best price of the day (i.e. the closing price is the highest for sell order, or lowest for buy order), but still want to have control over the price at which the order will be filled to ensure that the execution price is still within their comfortable / acceptable limit.

For the list of other types of order, go to: Types of Orders in Trading.

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Market-On-Close (MOC) Order

Market-On-Close (MOC) is an order to be executed as a Market Order (i.e. to buy/sell at the market price) as close as possible to the market close.
Hence, the order will be executed at the market closing price (which may differ with exchanges), or as near as possible to the closing price.

For this order, the broker normally set a time deadline for MOC order submission for that day, which is well before the closing of the trading day. After this MOC submission time deadline, the broker will not accept any more MOC order, and the traders also cannot cancel the submitted MOC order for that day.

As with market order, while Market-On-Close (MOC) order guarantees an execution, it cannot guarantee the price at which your order will be filled.

MOC order is useful when traders find that the closing price of a certain security has historically proven to be the best price of the day (i.e. the closing price is the highest for sell order, or lowest for buy order) and then decided to buy/sell at or near the closing price, whatever the price is.

In option trading, one possible use of this order is for options sellers who want to close their expiring option positions at the last minute of expiration day in order to maximize profit by letting the remaining last cent of option�s time value to decay before closing the position.

For the list of other types of order, go to: Types of Orders in Trading.

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Limit Order

Limit Order is an order to buy or sell by setting the maximum price (for buy) or minimum price (for sell) at which you are willing to buy or sell.
Hence, when you buy shares/options, you will not pay at any price higher than the limit you set, and it�s even possible for the order to get filled at a price lower than the stated limit.
Similarly, when you sell shares/options, you will not receive at any price lower than the limit you set, and it�s also even possible for the order to get filled at a price higher than the stated limit.

While Limit Order has an advantage that you can be sure the order will be executed / filled at the limit price or better, the disadvantage of this order is that there is no guarantee that the order will be executed / filled.

As a result, in the case when the price has moved up while you are placing a buy order (particularly when the market is moving very fast at that time), the order may not get filled.
Therefore, if an order is not filled on Limit Order within a few seconds, you should check what the prevailing ask price is at that time, and then modify the order accordingly if you�re still interested to buy the shares/options.

Note:
Some brokers may charge different commissions between Market & Limit Orders.
Typically, due to more complexity / additional condition, the commission for Limit Order is more expensive than for Market Order.
Hence, you need to check your broker�s commission before placing a Limit Order.

For the list of other types of order, go to: Types of Orders in Trading.

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