Overview
This lecture covered the main types of stock orders, how and where to place them, and the rules and qualifiers that affect their execution, especially as tested on licensing exams.
Types of Orders
- There are only two primary order types: market orders and limit orders.
- Market orders execute immediately at the best available price, focusing on speed over price.
- Limit orders execute only at a specified price or better, focusing on price over speed.
- Buy limits are placed below the current market price; sell limits are placed above.
Stop Orders and Qualifiers
- Stop orders are used to stop losses, protect profits, or establish positions.
- A stop order turns live if the price trades at or through the stop price.
- Once triggered, a stop order becomes a market or a limit order, based on instructions.
- Buy stops are always placed above the market price; sell stops below.
- The more qualifiers added (price, amount, time), the less likely the order gets filled.
Order Placement and Execution
- Orders are placed in relation to the current market price; using memory aid BLiSS ("Buy Limits and Sell Stops" below, others above).
- All orders are day orders by default unless marked GTC (good-till-canceled).
- Orders below the market are adjusted on the ex-dividend date to avoid accidental triggers unless marked DNR (do not reduce).
Specialized and Contingent Orders
- Fill or kill: execute entire order immediately or cancel it.
- Immediate or cancel: execute any part of the order immediately, cancel the rest.
- All or none: execute the entire order or wait (do not do partials).
Auction Markets & Order Handling
- NYSE is an auction, order-driven market; OTC markets are quote-driven.
- Floor brokers execute orders for clients and can exercise time and price discretion with "market not held" orders.
- "Market not held" orders do not require discretionary authority as action, asset, and amount are specified.
Key Terms & Definitions
- Market Order — Order to buy/sell immediately at best price.
- Limit Order — Order to buy/sell at a specific price or better.
- Stop Order — Triggered at a certain price, becomes a market/limit order.
- Qualifier/Contingency — Additional instructions like price, time, or amount.
- GTC (Good-Till-Canceled) — Order remains active until canceled.
- DNR (Do Not Reduce) — Instruction not to adjust order on ex-dividend date.
- Fill or Kill — Must execute entirely now or cancel.
- Immediate or Cancel — Fill any part immediately, cancel the rest.
- All or None — Fill entire order, or not at all; wait if necessary.
- Auction Market — Market where buyers and sellers are matched directly.
Action Items / Next Steps
- Review lecture slide deck to reinforce process for order placement and triggers.
- Set your test date between September 20 and September 30.
- Attend Tuesday live streams for further Q&A and practice scenarios.