May_27_Bloga_Order_Types_1

Trading Order Types

Want to trade a stock online but confused on which order type to use?  Understanding the differences between different order types would put an end to the confusion. Each order type has its own way of execution and can only be used a particular way.

The basic inputs for an order are:

a)      Whether to buy or sell

b)      Whether to execute at the current market price, higher price or lower price

Diagram Representation of Order Types

Order Types

Both buy and sell orders have their own ways of price execution depending on the order type selected, as shown above. So let us first study the basic order types.

Limit Order

This is an order type in which case, regardless of whether it is a buy or sell, the order is kept in the order book at a particular price until the price is triggered. This kind of order type is used when the trader wants to ensure that his buy order his not executed at a price higher than his trigger price, and that his sell order is not executed at a price lower than his trigger price.

Market Order

In this type of order there is no specific price mentioned; instead, it is guaranteed to get executed at the best available price. “Market” here means the best bid price quoted for a sell order and best ask price quoted for a buy order. This kind of order type is used when the trader wants a guarantee to buy or sell a stock at the best prevailing price in the market but does not want to specify a specific price.

Stop-Loss Order

As the name suggests, the order is mainly used to prevent the loss of a particular position already present or open in the market. But these orders can also be used to create a fresh position if the stock triggers a price. The two major terms used in a stop loss order are:

Trigger Price: The price at which the order execution is to be initiated.

Limit Price: The price, up to which the order is can be executed; otherwise the order remains open.

There are two types of stop loss orders.

Stop Loss Limit Order

In this kind of stop loss order both the trigger and the limit price are to be given. In case of a buy stop loss limit order the Trigger Price < Limit Price and in case of a sell stop loss limit order the Trigger Price > Limit Price.

Stop Loss Market Order

In this kind of Stop loss order, only the trigger price is to be mentioned. Once the trigger price is hit, the order becomes a market order and is sent to the exchange.

We have seen the basic order types widely used in the market. Since markets can be very volatile, special order types are also available for highly volatile scenarios.

Cover Order

This is a special order type which has a market order and a stop loss market order attached to it. In this type of special order, the first leg is always a market order; once executed, the second leg (the stop loss market order) is placed. The stop loss order cannot be cancelled. Both orders are interconnected. The order can be modified up to the Last Traded Price (LTP) in the case of a favorable market movement.

Cover Order Screen Shots on the NEST Trader Platform

Nest1

Nest2

Bracket Order

This is a special order type that has three different legs:

1st Leg          : Limit Order / Market Order

2nd Leg         : Stop loss Limit Order / Stop loss Market Order.

3rd Leg          : Limit Order / Market Order.

In a Bracket Order, the first leg is an independent order, whereas the second and third legs are both dependent on the first leg and are also interconnected. This means that only after the first leg has been executed can the second and third legs be considered in the market.

Since the second and third legs are interconnected, if one cancels either of the two legs, the other also gets cancelled; this is also commonly referred to as One Cancels the Other (OCO). Therefore it can be said that a Bracket Order can be used to book profits or lock in losses (due to stop loss order), which ever executes first, through one single order. Thus it will save a lot of time for a trader by putting all three orders in a single order.

Due the inter connectivity between the second and the thirds legs, the OCO feature ensures that no extra positions get built.

Bracket Order Screen Shots on the NEST Trader Platform

Nest3

Nest4

So there you have it: all the major order types, their disadvantages/advantages, and how to utilize them efficiently.

 

Vaibhav Vora

Vaibhav Vora

Vaibhav holds a Finance MBA degree. A calm and peace loving person, he enjoys listening to soft music.

  • manju

    An example for each of them wud b better as i am not able to understand clearly. And also the advantages and disadvantages are not put here.

  • Palani

    I would like to open trading account with you.Could you please confirm that “Bracket order” is available from you for all the clients who those opening account with you?

    • Vaibhav Vora

      We are working on bracket orders and it will be available in 2-3 months.

  • Ravinder Konka

    Hi,

    i am a new user for rksv, and first hand experience is very worst, except for backoffice report!!.
    your trading platforms either desktop which doesn’t work at all, and mobile platform which works, but very pathatic way it is being designed. you can always learn from other brokers, in these kinds of hitech trading tools. know hiding in learning from others. it’s easy see what /how other broking firms platforms are just compy the desing, or user interface, navigation etc.

    i am using your app for trading , and it’s just pathaptic way design for trading.
    and your nest desktop version doesn’t work in offices.
    please raise this concern to highest level, so that these issues gets fixed on a priority.

    example suggestions for mobile app:

    1. exchange type : ‘fon’ doesn’t selected by default. there must be a deafult option selected, so that user doesn’t need to select every time.

    2. default product type while placing an order, should be ‘nrml’ instead of ‘mis’, this ‘mis’ misguding the traders, and postions are squared off. please make product type default option as ‘nrml’.

    3. to add a scrip to market watch very long procedure, i have to navigate to many windows i.e script select, then a-z selection of relavent scrip, then move to expiry date, then select actual scrip,
    instead these could have been combined in single step, where user give scripname standard nse symbol, expiry date default selcted as current month expiry date,strike price selection incase of option, these all can be done in a single window. please learn from sharekhan mobile app, and also desktop version, how cleanly they did it.

    4. even your marketwatch app’s font also very small , doesn’t possible to zoom-in zoom-out.

    5. there unknown scrip’s are added in my marketwatch, and when i want to delete them they never delete.

    6. buy/sell window also has lot of windows to navigate inorder to place an order, where these all multiple window operations could have been designed in single window itself, just use clever way of designing UI.

    if you want i can help /develop android app for you and show how you can optimize the trading platform userfriendly, both desktop version/web version and android app version.

    please call me : 9618510576 for any further information.
    Regards,
    Ravinder. Konka.

    • Shrinivas Viswanath

      Hi sir!

      Thanks for your feedback. Yes, we are aware of the UI limitations our current platform has. We are actively working on improving our trading platform so that it’s much more user friendly in the future.

      Regarding the desktop platform not being able to work from work — I think you already know this but it’s probably because of an office firewall that prevents you from connecting to our servers.

  • sandeep

    Hi,

    Your help is appreciated for below points.

    1. Is it possible to integrate trading with analysis software. For e. g. Esignal advanced get. So that we can put orders straightway on charts of Esignal.
    2. Is there any Automated trading services or High frequency trading services provided by you.

    Thanks,
    Sandeep S. Patkar

  • KARAN SHARMA

    I have recently opened an account in your company..
    can u tell me
    1.whether this bracket order is available on EQUITY or to buy company stocks …
    and what sort of margin issues are related to each of the 3 legs in this order…
    2. – suppose the market price for a share is 100 and i think it will go up but it goes the other way .. now can i place a sort of order that will automatically SHORT (SELL) this share at 95 so that i can buy at a lower value…

    thanku

    • Vaibhav Vora

      Hi Karan,
      We are working on bracket orders and it will be available soon.
      For query 2, you can use a stop-loss order with a trigger price of 95.

  • prasad

    Unlike most 3-in-1 accounts
    provider, RKSV Back Office is
    not integrated with its
    trading platform. It’s a
    separate website and most
    data in the back office gets
    updated overnight. This is
    the case with all the
    discount brokers…..plz justify…not integrated with its trafing platform

    • Shrinivas Viswanath

      Hi sir,

      That’s because our trading and back office systems are separate. We are working on making them more real time / integrated in the future.

  • disqus_XjJnqTfSZS

    Whats the difference between a Cover Order and Stop Loss Market Order? As I understand 1. both are market orders 2. Cover Order has a range in which you can put the stop loss but no range in the Stop Loss M order 3. Stop Loss is compulsory in CO order but not in other. 4. They have different margins- CO has lower. Any other difference?
    If I use a SL M order then 2 orders are sent to the exchange, so is it that the margin is applied to both the orders eg – if the margin for intraday FNO is 10000, then when I buy 1 lot with SL M then will the margin utilized be 10000 or 20000??

    • Vaibhav Vora

      In cover orders, the applicable margin is higher of the SL difference between 1st and 2nd leg * 1.5 or minimum margin required (which is one fourth (1 / 4th) of exchange margin).
      Eg : In NIFTY futures, if Exchange margin is 40,000 it will be higher of 10,000 (1/4th of Exchange) or SL difference *1.5 of the two legs in case of a CO order

      In case of SL-M orders, the margin is dependent on the product you select. So, if you select Intraday product (leverage of 2.5 times of exchange margins) and for Carry forward product (it is exchange specified margin.)

      Eg : In NIFTY futures, if Exchange margin is 40,000, for CarryForward (NRML) order you will have to have 40,000 balance in your account pre order and in case of Intraday (MIS) it will be approx to 16,000

      Please note: above given figures are for explanatory purpose and it may vary depending upon your price quoted in actual markets.

  • Guru Prasad

    pls clarify me about placing stop loss orders as i want to buy @70 and sell @80 with stop loss 65..in this case,once my buy order limit price got executed at 70 then i need to place a sell order with stoploss 65?how can i place as trigger is what price and limit price is what price

    • Vaibhav Vora

      For placing a stoploss order you need to put a range for the SL order to trade. Eg : In you case the trigger price would be 65 and anything less then that may be 64.50 as the limit price. This means your stoploss order would trigger @ 65 and trade by max of Rs 64.50 (In case no buyers available upto 64.50 then would be a limit open order @ 64.50.
      The order SL-M order is a SL order type again where only the trigger price is to be kept and then the orders acts as good as a market order .Eg : In your case trigger price would be 65 and once triggered will be traded in the best market price available

      We have a better order type called as Bracket Order which has a in built system to define your profit and loss ranges.
      In your case it will be Buy @ 70, Sell above @ Rs 10 difference (i.e 80) and loss of Rs 5 difference ( SL-M@ 65)

      Hope this helps

      • GANESH DEY

        Dear Sir,
        How to put a bracket order in your RKSV nest platform.
        please specify…

  • Guru Prasad

    i mean in which price place i need to put my stoploss 65 either in trigger price or limit price?and what about stoploss market order

  • manju

    Guys some one reply!

    Explain with detail. A paragraph for each isnt enough for the basic order types. Put some pics damn it.

  • jobby

    I agree with all the points. Interface is not user friendly. Too much input required at every step. Same software/interface is used by all discount brokers.

  • ruchikbhatt

    How can I place short selling order for equity on NEST software? Can you please help me?

  • jayashree venugopal

    where can i find the orders bought at a specific date with the web interface

  • Gautam Acharya

    When Price Type SL-M or SL-L is selected while placing an order, is the Trigger Price for the Stop Loss valid only for that day? Is it possible to carry forward the stop loss and how?

    • Vaibhav Vora

      In Securities, orders are for Day validity only.
      In Commodities order can be placed with a validity of GTC (Good till Cancel ) or GTD (Good till Date )

  • rms error on cash market stop loss.