Important stock orders that investors need to know

Orders in stocks plays an important role in helping investors trade effectively. Let's learn about basic and advanced order types in this article.

1. What is a stock order?

Stock orders are tools that help investors buy or sell stocks on the stock market under specific conditions. Each type of order has a different way of operating, serving different investment strategies and ensuring liquidity for the market.

Orders in stocks can be divided into two main groups:

• Basic orders: Including market orders, limit orders, ATO, ATC, MP orders, helping investors make common transactions.
• Advanced orders: Including stop orders, stop-limit orders, help protect capital and optimize complex trading strategies.

2.  Basic orders in stocks 

2.1. Limit Order (LO)

A limit order is an order to buy or sell a security at a specific price or at a price that is more favorable to the investor. A buy order is only filled when the market price is less than or equal to the order price. A sell order is only filled when the market price is greater than or equal to the order price.

• Advantage: Control transaction prices, avoid risks due to strong fluctuations.
• Disadvantages: Orders may not be filled if the market price does not reach the desired level.

For example: 

• You want to buy ABC stock but only if the price drops to 48,000 VND. You place a limit buy order at this price and only if the market drops to that level will the order be executed.
• Similarly, if you place a sell limit order at VND 55,000, the stock will only be sold when the price reaches this level or higher.

2.2. Market order (MP – Market Price order)

A market order is a stock trading order that is executed immediately at the best price available on the market. When placing an MP buy order, the system will match the lowest priced sell order on the floor. When placing an MP sell order, the system will match the highest priced buy order on the floor.

• Advantage: Ensure transactions are instant.
• Disadvantages: No control over transaction prices, may suffer losses if the market fluctuates strongly.

For example: 

• You want to buy 100 shares of XYZ immediately regardless of the specific price. If the current price of XYZ has a best sell price of VND 50,000, your order will be filled immediately at that price.
• If you place a market sell order, your shares will be sold immediately at the current highest bid price.

2.3. ATO (At The Open) Order – Opening Order

ATO order is an order to buy/sell securities at the opening price of the trading session. This order is only valid during the opening periodic order matching session (9:00 – 9:15).

• Advantage: Priority is given to matching orders before LO orders.
• Disadvantages: No control over exact price.

For example: 

Investor A wants to buy XYZ stock as soon as the market opens but does not know the exact opening price. They place an ATO order, which will be filled at the opening price determined by the market.

If there are multiple ATO orders placed before the opening, they will be matched in order of priority.

2.4. ATC (At The Close) Order – Closing Order

An ATC order is an order to buy/sell securities at the closing price of the trading session. This order is only valid during the closing periodic order matching session (14:30 – 14:45).

• Advantage: Priority is given to matching orders before LO orders.
• Disadvantages: No control over exact price.

For example: 

Investor B wants to buy VNM shares but only wants to buy at the closing price to avoid mid-day fluctuations. They place an ATC order, and when the market closes, the order will be filled at the final price.

If there are multiple ATC orders placed before the closing time, these orders will be processed first before the market closes.

2.5. Conditional Order

A conditional order is an order that is only triggered when one or more specific conditions are met. This type of order allows investors to automate trading based on specific market scenarios.

• Commonly used conditional statements:
  • Stop Order: Triggers only when price reaches desired stop loss or take profit level.
  • Stop Limit Order: Combination of limit order and stop order.
  • Trailing stop command: Automatically adjusts the trigger price as market prices fluctuate.
• Advantage: Support investors to better control risks.
• Disadvantages: The order may not be matched if the condition is not met.

For example: 

You want to buy XYZ stock but only when the price drops to VND 45,000, and place a sell order as soon as the price reaches VND 50,000. This order can be executed using an OCO order.

Investor A places a buy stop order at 48,000 VND and a sell stop order at 52,000 VND to optimize the trading strategy according to price fluctuations.

Orders in stock trading The above helps investors make effective transactions, take advantage of market opportunities, and at the same time control the desired price to optimize investment strategies.

3. Orders in derivatives

Orders in derivatives designed specifically for futures and options trading, giving investors more flexibility in controlling order matching and optimizing derivatives trading strategies. Some orders in Derivatives Common ones include:

• Fill Or Kill (FOK): An order that requires the entire order volume to be filled immediately, otherwise the order will be canceled. For example, an investor wants to buy 100 VN30 futures contracts but will only accept if the entire volume can be filled immediately. If there are not enough 100 contracts, the order will be canceled.
• Immediate Or Cancel (IOC): This order requests to immediately match the available volume, the rest will be canceled. For example, an investor places an order to buy 500 contracts, but the market only has 300 available contracts, then these 300 contracts will be matched, and the remaining 200 contracts will be canceled.
• Good Till Cancelled (GTC): This order will remain in place until it is executed or canceled by the investor. For example, an investor places an order to sell a futures contract at 1,250 points and wants the order to remain open until that price is reached.
• Good Till Date (GTD): GTD order allows investors to place orders that are valid until a specified date in the future. For example, an investor places an order to buy VN30 futures at 1,300 points and wants the order to last until June 30, 2025 if not filled.
• Market To Limit (MTL): This order is filled at the market price, but if only a part of it is filled, the rest will become a limit order. For example, if an investor places an order to buy 400 VN30 contracts at the market price but only 250 contracts are filled immediately, the remaining 150 contracts will become a limit order at the nearest matched price.

These orders help investors have more effective trading strategies, from requesting full volume matching, partial matching, to maintaining orders until a certain time to suit the investment plan.

4. Order of priority of orders in securities

During trading on the stock market, orders are executed in a certain order of priority to ensure the transparency and efficiency of the order matching system. The priority principle is applied according to two main criteria:

4.1. Price priority

• Buy orders with higher prices will be matched before buy orders with lower prices.
• Sell orders with lower prices will be matched before sell orders with higher prices.
• This helps ensure that investors have the opportunity to trade at the most advantageous prices in the market.

4.2. Time priority

• If there are multiple orders at the same price, the order entered into the system earlier will be matched first.
• This principle helps ensure fairness among investors, avoiding fraud or unfair preference.

 4.3. The impact of priority on trading strategy

• Investors who want to trade quickly often use market orders to get immediate execution, but may suffer from suboptimal pricing.
• Investors placing limit orders need to consider the order price to ensure priority order matching while still optimizing profits.
• ATO and ATC orders have high priority in periodic order matching sessions, helping investors take advantage of early and late session price fluctuations.

5. Conclude

Understanding orders in stocks and investment knowledge help investors optimize trading strategies, minimize risks and increase investment performance. Choose the order that suits your trading style to achieve the highest efficiency in the stock market.

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