Section: 7 Trading on Exchanges

Sub Section: 7 Types of Orders

  • Market Order: These are simply buy or sell orders that are to be executed immediately at current market prices. The investor gives the order and the broker buys the security at whatever is the prevailing market price.

  • Limit Order: Investors might choose to place a limit order where they specify prices at which they are willing to buy or sell a security. If the price of the security goes beyond the limit, the trade will not be executed.

  • Day Order: These expire at the closing of a trading day. If the order is not executed within the same day, it gets cancelled.

  • Open or Good-till-cancelled Orders: These remain in force for up to six months, unless cancelled by the customer

  • Stop-loss Orders: These are similar to limit orders in that the trade is not to be executed unless the stock hits a price limit. The major difference is that in stop-loss orders, the investor has already taken a position. For example, lets assume that a stock is trading at SR 20 and the investor expects it to rise to SR 25. However, in order to protect from an unexpected downside, a sell order can be placed at SR 17. Hence, in case of a downward movement, a minimum selling price of SR 17 would be ensured and the loss would be limited.