The following are various types of orders prevalent in the US markets:
Market Order: The most common form of order is the market order, which means the order to buy or sell at the best current market price. Market orders provide immediate liquidity to the market. The investor, who wants to buy the stock, instructs his broker to buy the stock at the lowest available price. Similarly, the seller instructs his broker to sell the stock at the highest available price; the investor is unaware of the price at which the stock will be traded.
Limit Orders: In limit orders, the investor specifies the limit at which he would like his stock to be traded. The buyer would specify the maximum limit at which the stock could be bought by the broker. Thus, the broker has the choice to buy the stock at the specified limit or lower than that. Similarly, for the seller, the maximum limit is specified, below which the stock cannot be sold. The broker has the option to sell the stock at or above the specified price limit.
Day Order: Day orders remain valid only during a specified day on which the order is placed. All market orders are taken only as day orders. The underlying assumption of this order is that the market, economic and industry conditions may change; thus investment, should be specified for a particular day only.
Week Orders: Week orders are valid for a particular trading week. For example, a trading week order placed on the BSE, is valid from Monday to Friday. With the expiry of the trading week, the order also expires.
Month Orders: Month orders are valid for a specified trading month. For example, a month order specified for June 2005 will be valid only in the month of June 2005 and will expire as the month ends.
Open Orders: Open orders are also known as ‘good till cancelled' orders. They are usually placed jointly with the limit orders. They are generally placed as monthly or quarterly orders. But there is a certain amount of risk associated with open orders as the investor may forget about the open order placed by him or market conditions may change so drastically that the order placed may not be desirable at all.
Stop Order: Stop order is a type of limit order but with a variation. A stop order to sell becomes a market order when the market price goes below spot order price. Similarly, stop order to buy becomes a market order when the market price goes above the stop order price. Stop orders limit the loss and protect investor's profit.
Stop Limit Order: Stop limit order helps to avoid the uncertainty associated with the stop orders. In case of stop limit order to sell, the investor can specify the minimum price he will accept and for stop order to buy, he specifies the maximum price that he is ready to pay for a stock.
Discretionary Orders: In this type of order, the broker has the discretion to decide whether to buy or sell the security and also its price.