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Hi guys from Andrea Unger- I wanted to discuss a little bit about type of orders in the Market because sometimes I’m asked and I see that not always there is a clear picture of what the main types of orders are.

Well the first kind of order to enter the Market is the Market order; a Market order or Market buy or Market sell is an order sent to the Market to enter long or short and to buy at any price; I just want to enter long Market buy: I enter, I just buy and I don’t care about what price I am field, I just want to buy; and the same is to sell. That’s pretty much an obvious picture of how the order looks like.

There is then the Stop Order, normally indicated as STP and the Stop Order has a level -the “stop level”- and it says that when the Market touches this level from below normally I enter ‘long’ with the Market order. “Stop buy” means once the Market climbs up to this Stop Level an order is sent to enter long; it’s a typical break out entry. So this may be Level 10, I wait for prices, for quotes to get up to 10, as soon as the first contract is exchanged to that 10, I, my machine send a Market order to enter long. I may enter at 10, I may enter at better price if there is a drop before my order is sent in a bunch of second or I may enter the Market at the much higher price if there is a strong break out, a very fast break out.
There are then the Limit Orders, and the Limit Orders – a Limit Buy Order – is something where we have a level and we sit there waiting for a Market to come and catch us. It means normally Market come from there, here when it comes to our level we enter because we’re there waiting to be served.

Limit implies that I don’t want to buy at the higher level than the level I placed my Limit Order, and that’s the most typical order: let’s go there wait to buy at 10, Market is at eleven, I wait to comes down and I want to enter at 10.

Stop and Limit can be combined to a Stop Limit Order where actually there is the same structure as the Stop Order: once a certain level is hit I send an Entry Order which is no longer as in the Stop Order case a Market Order but a Limit Order. Sometimes and most often Stop and Limit levels are the same – I say enter Stop Limit 10 – it means that if Market hits 10 I send an order to buy but I don’t want to pay more than 10.

The risk in this case is that in case of the fast and strong breakout my order remains unfilled because I want to pay no more than 10 but in the bunch of seconds it takes for my broker to send the order to the Market, the Market already went up and never comes back to 10 so I will be waiting at 10 with the Market trading at 12 for example, and this is very frustrating.
You can always replace different levels of limits so you can say Stop 10 Limit 11, so that you limit the maximum level you’re buying at, but you still give some room from the Stop Level to you potential entry so this is for safety to enter for sure the Market and this is something I recommend in any case with Stop Losses where you want to exit but you don’t want to stay in the Market so a Stop Limit – pure Stop Limits Level can be dangerous because you might stay there unfilled and in dramatic cases it would imply heavy losses – either you use Stop orders or you place a limit at a certain distance and you are pretty much sure to exit in that case.

Another kind of orders which I just mention because sometimes they are considered, are the MIT: Mark if touch order and that’s a version of the Limit Order where we don’t sit there and wait but we wait for prices to hit a level and then – if the level is touched – we send a Market Buy Order so we are sure to enter.

Why are we doing this, we’re doing this because in some cases the level where we placed the order are full of other traders who want to enter so we are maybe one in the middle of thousands, imagine the MiniS&P, so I want to be sure. How can we be sure if that is the best level actually so that’s the very bottom to be traded all the contracts in front of us are entering and we are as well? We don’t know, we can’t say so we say okay, if it hits the level I enter at market. In this case normally we enter at least at one tick worse than the level we desired but we are pretty much sure to be in the Market because Limit orders sometimes remain unfilled, that is also a case where frustration comes out.

These are the main types of orders, you can do anything with this so much more to come, stay tuned, ciao!

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Categories: Technical

Andrea Unger

Known as the only 4-Time Trading World Champion (2008, 2009, 2010, and 2012), Andrea Unger is a full-time professional trader since 2001 and honorary member of SIAT (Italian Society of Technical Analysis, a branch of IFTA). Appreciated author, he is often invited as a speaker all around the world.

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