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Types of trade orders

 

The use of different orders during trading required futures contracts is determined by the capabilities of various exchanges, as well as the capabilities of a particular trading platform.

Limit Order
It is used to enter (exit) the market in the case of a specified or more favorable value. Note that this order is placed below the current price. It can only be at the indicated price, or lower. Accordingly, a “Limit” order for sale is placed higher than the current market value; it can be executed only at the specified price or higher.

Market Order
Allows you to buy or sell at market (current) value in the fastest way. Orders of this type are served first and foremost, according to the highest priority. In this case, the price is not indicated - instead, your trading system, or the broker executes the order at the best price available; also, according to the CFTC clauses, brokers are required to provide you with the highest level of services, while you do not have control over the market. In case of high volatility and low volumes (if the trades are carried out unevenly), Market orders are far from the best alternative.

Stop Order
The peculiarity of the order is to become a “Market” order when a certain price level is reached on the market. These orders are most often used when closing positions - in order to limit losses on losing positions, or stop the fall of profitable positions in time. A Stop order can be placed to buy above the market, or sell below the market. If the market moves against you, these orders are executed - they become “Market” orders, closing your positions. Note that applying Stop orders requires a certain amount of experience. Thus, if you place a Stop order too close to a position, in case of any undesirable market trends, it will lead you out of the market prematurely. If you put it too far, you can lose too much in an open position. Therefore, before making a decision to place a Stop order, it is necessary to thoroughly study the volumes, daily trading ranges, volatility; the “Stop” order is also used to open positions, however, placing for this purpose may not be missed by the trading platform.

Order "Valid Until Canceled" - "Good Till Canceled" (GTC)
This order continues to be valid until execution, cancellation, or expiration of the contract for which it was submitted. When an order does not have this specification (GTC), it will automatically be turned into a “Day” order, therefore, after the end of the trading session during which it was placed, it will be canceled (or executed). It is also called an "Open" order.

Market if Touched (MIT) Order
This order is essentially a “Limit” order. However, it works like a “Stop” order: when the price is reached, the order is executed at the closest available price - it becomes a “Market” order. It should be borne in mind that some exchanges do not accept these orders, so you should first study the rules in detail.

Stop / Limit order
Set to control the price at which the “Stop” order will be executed. This order uses 2 prices: for the “Stop” order, and for the “Limit” order. The order indicates that if the market reaches the value of the “Stop” order you set and becomes a “Market” order, you will be able to execute this order only if the execution price does not go beyond the set “Limit” order. Stop / Limit orders are almost always used to open positions, not close them.

Market On Close (MOC) Order
This order is executed in the last minutes before the close of the trading session at the market (current) value.

Market On Open (MOO) Order
It is executed immediately (during the first minutes) after the opening of the trading session at the market (current) price.

Stop Close Only Order
Generally speaking, this order represents a “Stop” that is executed only at the time of the market close. Another option is when the market value equaled (or passed) the price stated in the SCO order.

Fill or Kill Order
Indicates whether to buy or sell at a specific value, or to cancel this order if it cannot be executed immediately.

Depending on different technical capabilities, different trading platforms provide for the following orders:
Trailing Stop - automatically changes the order price;
Bracket Order - allows you to automatically place orders according to predefined parameters.

Orders placed earlier (not executed) can become:
Cancel - “Cancel”, or Replacement - “Replace / Cancel” - the existing order is changed by a new order with the parameters you need.

“One Cancels the Other (OCO)” Order
The above order indicates that, if one of the orders is executed, it changes as follows.

How OCO works in practice

An OCO feature is actually 2 different orders on the exchange - Stop Order &American Clearing; Limit Order. The OCO functionality to Cancel the other Order when one side is filled is an off-exchange function handled/generated by the trading platform. There is no official OCO order type with any exchange.

How does this affect or generate required margin?

Margin requirements are based off orders that will generate a new position. For exAmerican Clearingle, in order to buy/sell 1 contract of the ES the day trade margin is $400. The account balance must be equal or greater than $400 for an order to buy/sell 1 contract of the ES to be accepted.

Next, let’s say the account balance is $401 and now the account is long 1 contract of the ES. An order for a sell limit or a sell stop for 1 contract will be accepted, because the order will be offsetting/closing the original long contract - not generating a new short position.

If customer attempts to place an OCO on with this position it will be rejected because the 2 orders - sell limit and sell stop - is not only an offsetting order, it also could generate a new short position.

1 long/buy position = 1 short/sell (stop or Limit) order = Net Zero

OCO = 1 long/buy position = 1 short/sell stop order &American Clearing; 1 short/sell limit order = Net 1 short/sell order

ExAmerican Clearingle: If news or economic numbers are released, the market can become extremely volatile, there is the chance that both side/orders of the OCO could be filled before the order to cancel the other side is received by the trading platform and message sent to back to the exchange. If both orders (sell stop &American Clearing; sell limit) are filled - the customer’s position has thus changed from long 1 ES to now short 1 ES without enough margin/cash in the account to meet the requirements to open a new position.

Another ExAmerican Clearingle, let’s say the customer wants to work 15 orders to get in the market - working 15 orders would require 15 times the day trade margins or 15 x $400 for the ES. If the account balance was less than the required 15 x $400 or $6'000, it would reject the orders due to insufficient cash to meet required margins.

Explanation of Required Margin

If account balance only allows you to get into the position, then you will only be able to work either a limit order or stop order to offset/close the existing position. Using the exAmerican Clearingle above, let’s say your account balance is $6'000. You buy 15 ES contracts. This now has used all of your available cash/margin. You will only be able to place up to 15 sell orders - either stops or limits. Any sell orders greater than 15 would be greater than the 15 buys and could generate a new short position - and would be rejected due to insufficient cash/margin to work greater than 15 sell orders.

Explanation of OCO Required Margin

Original position either buy/sell (margin required) - offsetting order, either limit/stop (no margin required) - 2nd offsetting order, either limit/stop (margin required)

ExAmerican Clearingle of total margin/cash required to trade 1 contract of ES with an OCO exit order:

Original position either buy/sell 1 contract of the ES ($400 margin required) - offsetting order, either limit/stop 1 contract of the ES (no margin required) - 2nd offsetting order, either limit/stop 1 contract of the ES ($400 margin required) = $800 Total Margin Required

If you are going to trade multiple contracts, multiply this above exAmerican Clearingle time the number of contracts trading.

For exAmerican Clearingle, 2 ES contracts will require $1'600 | 5 ES contracts will require $4'000 | 10 ES contracts will require $8'000 | etc...