What are various kinds of stock orders in Sydney?

by Joseph K. Clark

A stock order is an instruction to buy or sell a particular amount of shares at the best available price. There are several kinds of stock orders that investors may utilize. These can include ‘limit’ and ‘stop’ orders. You could use any of these to buy stocks in Australia.

Sydney’s stock orders come with terms and conditions attached, meaning they can be tailored according to the investor’s requirements.

stock order

Limit order

A limit order directs the broker to buy or sell shares at a pre-defined price. If the investor is trying to make a profit by buying, they will set the limit price higher than the market value. If an investor is selling, they will set their limit price below the current market rate.

Limit orders are commonly used by investors looking to ‘buy low, sell high’.

Stop Order

An instruction to buy or sell shares when the price of these shares reaches a certain level is called a stop order or stop-loss. It can be either higher or lower than the current market value.

Stop orders are commonly used by investors who believe the price of their investments may decrease soon or increase soon and therefore want to ensure or guarantee that they make a financial gain.

The constantly fluctuating nature of stock prices means that you can activate a stop loss at any moment, which is why there are strict regulations regarding stop orders. It is only permitted to place one when the investor has enough capital in their trading account to ensure that they will not incur a loss due to the order being activated.

You cannot withdraw this money until after the trade has been completed and both parties agree with the terms to ensure the financial risk is sufficient insurance against default by either party.

Trailing Stop Order

A trailing stop order is an instruction that will trail or follow the current market price by a pre-defined amount of money. It means that if the stock price decreases, the stop loss will also decrease and vice versa.

Trailing stops are similar to ‘stop’ orders, except they constantly adjust to changing market prices. They are commonly used by investors who believe there may be further decreases in their value or increases in price soon but cannot set a stopping point until after it has occurred.

Fill or kill

A fill or kill (FOK) is a stock order you must execute immediately before its expiry time or is cancelled. It means that either the order is completed fully or not at all. Once a fill-or-kill request has been submitted, there are only 15 minutes to complete the entire transaction. If this timeframe expires, the trade fails, and any funds committed are returned to their traders’ accounts unaltered.

Fill-or-Kill orders are usually used when an investor needs their purchase/sale to be made immediately due to an upcoming event. It can help reduce the risk of ‘price slippage’ when the stock price falls between the time that investors place their order and it is executed. It can often occur with high-impact news, even if only small amounts are traded on the market.

Market Order

A request to buy or sell shares at the best available price in the current marketplace is a market order. It instructs your broker to purchase or sell at whatever prices are currently available on the open market.

A trader may use a limit or stop price within their market order, so they do not have all their capital tied up in one investment unless it reaches their pre-determined prices. If the trader has enough money in their account to cover the cost of the shares they want, then they can execute a market order immediately.

Market orders are commonly used because investors may not have time to place a limit or stop price and will instead trust that the stock price will rise or fall at some point during trading hours.

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