Types of orders in the Stock Market

When you want to buy stock in the share market then you will see there are different types of orders given. Basically, an order in the share market contains instructions to a broker or brokerage firm to buy or sell a security on behalf of an investor. An order is the fundamental trading unit of a securities market in which an investor tells the broker exactly when and how you want to buy or sell the stock. In this blog, you get all the information about types of orders in the share market. Before moving on to the types of orders in the share market. Let's first discuss how orders work. When you place the order it won't directly go to the stock exchange, your order reaches to stock exchange through a broker. You can place your order at both NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).

Types of Stock market Orders

Following are the most common types of share market orders,

  • Market orders

  • Limit orders

  • Stop-loss orders

  • A Buy Stop Order

A Market Order

It is an order to buy or sell a security/stock immediately. When you want to buy a stock immediately at whatever current price then you have to place a market order. This order guarantees that the order will be executed immediately, but does not guarantee the execution price. A market order normally will execute at or near the current bid (for a sell order) or ask (for a buy order) price. This price fluctuation is because when you place an order it takes some time to process and at the stock exchange there are billions of transactions that happen in a fraction of a second. Investors need to remember that the last traded price is not necessarily the price at which a market order will be executed.

A limit order

It is an order to buy or sell a security at a certain price or better. When you chose to place a limit order you set the limit (range of price) at which you want to buy or sell the stock. A buy limit order will execute only at the limit price or lower, and a sell limit order will execute only at the limit price or higher. That means for the buy limit a stock is purchased only when the price is of stock is equal to or lower than the set buy limit, and your stock will only be sold if the price of a stock is equal to or higher than the set sell limit. E.g.An investor wants to purchase shares of XYZ stock for the amount of no more than 10 Rs. The investor could submit a limit order for this amount( i.e.10 Rs ) and this order will only execute if the price of XYZ stock is Rs.10 or lower.

A Stop Order Or Stop Loss Order

It is an order to buy or sell a stock when the price of the stock reaches a certain price, known as the stop price. A stop-loss is designed to limit an investor's loss on a security position. When the stop price is reached, a stop order becomes a market order. Once a stop order triggers at the specified price, it will be filled at the current price in the market it means that it could be executed at a price.

A Buy Stop Order

A buy stop order is an order to purchase security only when the price of the security reaches the specified stop price. It is a buy limit order. Investors use a buy-stop order to limit a loss or protect a profit on a stock that they have sold short. A sell stop order is entered at a stop price below the current market price. Investors use a sell-stop order to limit a loss or protect a profit on a stock they own.

What do CNC, MIS, and NRML mean?

These are the common product codes that are available on the trading platform. When you want to buy a stock, you need to specify for how long you are buying the stock. So for this MIS, CNC, and NRML codes are used. Let's understand these codes in detail.

Margin Intraday Square Off (MIS)

This is used for trading Intraday Equity, Intraday F&O, and Intraday Commodity Trading. Using the MIS product code investor get an intraday leverage between 3 to 6 times based on what stock you are trading. The amount of leverage differs from broker to broker. For F&O, the margins required will be 35% and 45% of the total margin required (SPAN + Exposure), for index & stock contracts respectively. No margins will be provided for buying Options. All the positions under the EQ MIS and F&O MIS product code will get automatically squared off starting from 3:20 pm and from 3:25 pm respectively (which is subject to change as per our RMS policy). If you use the MIS product code for Commodity, you will get extra leverage and you will need only 50% of the overnight exchange prescribed margin (SPAN + exposure) by using this product type.

Cash and Carry (CNC)

This is used for delivery-based trading of equity. When you want to buy a stock for a long duration you can use a CNC code. When you use CNC product code you won’t get any leverage and your position won’t be auto squared off. You will not be able to sell using the product code CNC without holding the particular stock in your DEMAT account.

Normal (NRML)

This code is used for overnight trading of futures and options. If the client does not want any excess leverage, he can use the product type NRML, and he would not have to worry about auto square-offs. NRML product code is also used for Delivery based trading of Currency.

Just remember this

  • CNC – For trading Equity in the delivery

  • MIS – For trading Equity & futures and options (F and O) in intraday

  • NRML – For trading Commodities, Currency, and futures and options (F and O) for an overnight position.

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