Order

Order: Definition, Types, Duration, and How Orders Are Processed

An order is an instruction you give a broker to buy or sell a security under specific conditions. Orders define what to trade, how much, at what price, and how long the instruction remains active. Choosing the right order type helps control execution price, limit losses, and manage risk without constant market monitoring.

Key takeaways

• An order tells a broker to buy or sell a security on your behalf under set conditions.
• Market orders prioritize immediate execution; limit orders prioritize price control.
• Stop, stop-limit, and trailing-stop orders help limit losses or lock in gains.
• Time-in-force settings determine how long an order remains active (day, GTC, IOC, etc.).
• Brokers route orders electronically to exchanges, market makers, or internal match systems and must seek best execution.

Common order types

Market order

Executes immediately at the best available price. Best when you want certainty of execution; risk is slippage (price change between submission and execution).
Example: Place a market order to buy shares now and accept the prevailing price.

Limit order

Specifies the maximum (for buys) or minimum (for sells) price you’ll accept. Ensures price control but may not fill if the market never reaches your limit.
Example: Set a buy limit at $370; purchase occurs only if the price falls to $370 or lower.

Stop-loss (stop) order

Becomes a market order once a specified stop price is reached. Used to limit losses or protect profits, but final execution price can differ from the stop price in fast markets.
Example: Own shares at $110; set a stop at $105 to trigger a sale if the price falls.

Stop-limit order

Combines a stop and a limit: a stop triggers the order, and the limit sets the worst acceptable execution price. Protects against selling far below the trigger but risks no execution if price moves past the limit.
Example: Stop at $175, limit at $173—order triggers at $175 but executes only at ≥$173.

Trailing stop

A stop price that adjusts with favorable price movement by a fixed percentage or dollar amount. Locks in upside while allowing room for gains.
Example: 10% trailing stop on a stock that rises to $300 sets the stop at $270 (10% below).

Other advanced orders (brief)

• Take-profit: a stop-style order used to lock in gains.
• One-cancels-the-other (OCO): links two orders so filling one cancels the other.
• Iceberg: hides the full order size by displaying only a portion at a time.

Order duration (Time in Force)

• Day order: Expires at market close if not filled (default on many platforms).
• Good ‘til canceled (GTC): Remains active until filled or canceled (brokers often limit duration).
• Immediate-or-cancel (IOC): Fill what’s available immediately; cancel the rest.
• Fill-or-kill (FOK): Must be completely filled immediately or canceled.
• All-or-none (AON): Requires the entire quantity to be filled; may persist until canceled depending on the broker.

How orders are processed

Orders are routed electronically. Common execution paths:
* Internal matching within the broker to other customer orders.
* Routing to exchanges or electronic communication networks (ECNs).
* Execution via market makers or designated liquidity providers.

Brokers are required to seek “best execution,” aiming to obtain the best available price at the time of the trade. For most retail trades, execution is fully electronic; human traders typically handle large, complex, or institutional orders.

Practical tips

• Use market orders when immediate execution matters and slippage is acceptable.
• Use limit orders to control price but expect possible non-execution.
• Use stop-loss or trailing stops to manage downside risk and lock in gains.
• Check your broker’s time-in-force options and any limits on GTC duration.
• For large or complex trades, consider speaking with your broker about execution methods.

Conclusion

Understanding order types and time-in-force options gives you control over price, timing, and risk when trading. Select the order that matches your strategy and trade size, and remember that brokers route orders across multiple venues to achieve execution.