What do the different order types mean?

You can choose the manner in which your order will be sent to the market and condition that will activate the price in the marketplace. Orders can be specified using prices or strategy based on what you are trying to accomplish.

Here is an overview of different order types available on TSTrader:

Market

Description: Market orders execute the trader’s order at the next available price. No price is specified with the order and the order is filled at the best possible price obtainable at the time the order reaches the exchange.

Function: Market orders are generally recognized as the most frequently used order type and traders use market orders to enter or exit a trade quickly, since market orders execute at the current market price, when execution certainty is a higher priority than price execution.

Note: Market orders are not typically used in thinly traded markets where the bid-ask spread is wide and the filled order may be substantially different from the last traded price.

Limit

Description: Limit orders are used to specify a price limit at which the order must be executed. Limit orders to buy are placed below the market and limit orders to sell are placed above the market.

Function: Since the limit order must be filled at the designated price or better, traders use limits to define the worst price at which the order will be executed, prioritizing price execution over execution certainty. Limit orders submitted for buying a futures contract are executed at or below the limit price and limit orders for selling a contract are executed at or above the limit price.

Note: Since a limit order must be executed at the specified price or better, the market may touch the limit price several times with the trader not receiving a fill, depending on where the trader’s order is in the order book. The market must trade completely through a limit order’s price in order for a trader to earn a fill and partial fills can occur if only part of the order is executed. A limit order remains in the order book until the order is either executed, cancelled, or expires.

Stop

Description: Stop orders are price orders that execute at the next available price once the market trades at the designated order price. Stop orders to buy are placed above the market and stop orders to sell are placed below the market.

Function: Traders use stop orders in an attempt to limit losses if the market moves against a market position, protect profits on an open position, and initiate a new position in the market. Once the stop price is touched, the stop order is said to have been "elected” and will be treated like a market order, receiving a fill at the best possible price.

Note: Stop orders do not guarantee execution at the stop order price and price slippage may occur in certain market conditions. Unlike limit orders, stops are not required to be executed at the designated price or better.

Stop-Limit

Description: Stop-limit orders are an order type used to submit a limit order when the specified stop price has been triggered. It lists two prices and is used to gain more control over the price at which the stop is filled.

Function: The stop-limit order is used to indicate that, once the stop price has been triggered, the trader does not wish to be filled beyond the limit price.

Note: A stop-limit order eliminates the price risk associated with stop orders, since the stop price is not guaranteed. However, the trader assumes the risk that the order may not be filled even if the stop price is reached by the market, causing the trader to miss the market altogether.

Trailing Stop

Description: A trailing stop order places a stop order at a designated price and trails the market in predetermined increments when price action moves the market away from the stop order.

Function: Trailing stop orders allow a trader to set the maximum desired stop loss level and automatically move the stop with the market as prices move in favor of their position, attempting to smartly adjust the stop order to the upside while maintaining a set downside protective level.

Note: Trailing stops are useful for effective profit taking and automating the protective stop loss movement as part of an exit strategy, especially for breakeven exit strategies.

One-cancels-other (OCO)

Description: Two orders are linked together and, when one order is filled, the other order is simultaneously cancelled.

Function: OCO orders allow traders to set a contingency for their order management based on an action taking place in the market, automating a portion of the trade management and giving the ability to manage orders efficiently.

Note: OCO orders are primarily used as bracket orders as part of an exit strategy, with the stop and limit orders “bracketing” a position to capture a gain and limit a loss.

One-sends-other (OSO)

Description: Two orders are linked together and, when one order is filled, the other order is submitted to the market.  

Function: OSO orders allow traders to set a contingency for their order management based on an action taking place in the market, automating a portion of the trade management and giving the ability to manage orders efficiently.

Note: OSO orders can be used with OCO orders to automate the exit strategy once the primary entry order has been filled and a position in the market is created.

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