Day orders are usually used by investors who want to buy or sell at a specific or better price —like if you’re waiting for your favourite stock to drop and then jump on it, or if you think it’ll bounce back in price and don’t want to miss out on any gains.
You open a day order with the full intent of closing it at the end of that day. This type of order is perfect for traders who are looking to take advantage of short-term price movements within a specific timeframe.
Day order example
If you place a buy day order at 3:00 PM WAT and the market closes at 4:00 PM WAT, your entire trade will be executed during the final hour. If the stock price rises from $25 per share up to $30 by 3:00 PM, your entire purchase will occur at this higher price rather than wait until 4:00 PM when prices would have been lower due to less demand.
Types of orders
Market day order
A market day order is a buy or sell order that executes on the same trading day. A market day order has no restrictions on when it can be filled, so long as your broker is open for business during the trading day.
IOC order
An IOC order is filled immediately or cancelled.
The IOC order is cancelled if the entire quantity cannot be executed. The IOC order may be executed only partially and at different prices, depending on changes in market conditions and prices during execution.
Good till cancelled order
Good till cancelled (GTC): A GTC order remains open until the investor cancels it.
Good till day order
Good till day (GTD): GTD symbol indicates that an option contract will remain open until the date shown by the symbol.
Stop order
If you’re trying to buy or sell a stock, but only if the price reaches a certain level, use a stop order. Stop orders are used to limit losses or to protect profits on short sales.
For example, say you want to sell your shares at $50 or less, if the price falls below $50 at any time during market hours, your order will be filled at that price point.
Limit order
A limit order is an order to buy or sell a security at a specific price. The main drawback of using a limit order is that you may miss out on an opportunity to execute the trade if the market moves in your favour.
A buy limit order is placed below the current market price and tells your broker to buy a stock at no more than this price. A sell limit order is placed above the current market price and tells your broker to sell stock at no less than this amount
Conclusion
You should always try to understand what each order type does before placing one so that you don’t end up losing money on an order that doesn’t execute properly. Remember that the more you learn about trading and investing, the better off you will be!
Learn more about investing
No matter your level of financial literacy, we have more than enough financial education resources to get you started. Also, with our wealth management app, you can easily save, invest, and begin your own path to financial independence.
Related Articles: