The types of orders most commonly used are briefly described below. Orders can be
placed as Good Til Canceled (Open Orders) or Day Orders. Of course Market Orders
are neither, they are filled ASAP.
The market order is the most frequently used order and is the best order to use
if you want to have an order filled ASAP. The market order is executed at the best
possible price obtainable at the time. EXAMPLE: A sell order at the "market" might
be: "Sell 5 December Corn at the Market".
The limit order is an order to buy or sell at a designated price. Limit orders to
buy must have a price below the last trade while limit orders to sell must have
a price above the last trade. Because the market may never reach a limit price the
order may be unable. Even though you may see the market touch a limit price several
times, this does not guarantee a fill. In most instances, the market must trade
through the limit price to receive a fill. EXAMPLE: Let's assume December Corn last
traded/settled at 640. A limit order to buy might read "Buy 3 December Corn at 632".
A limit order to sell might be "Sell 3 December Corn at 646.5.
Stop orders can be used for three purposes:
- to minimize a loss on a long or short position,
- to protect a profit on an existing long or short position, or
- to initiate a new long or short position.
A buy stop order must always be placed above the market and a sell stop below the
market. Once the stop price is touched, the order is treated like a market order
and will be filled at the best possible price. EXAMPLE: Let's assume December Corn
last traded/settled at 640. A buy stop order might read "Buy 3 December Corn at
649 stop." A sell stop order might be "Sell 3 December Corn 631.5 stop."