When trading stocks in Singapore, there are some risks you’ll need to avoid. You can place a few different types of stock orders to help mitigate these risks. Try this out yourself via this link.
Limit Order
A limit order is to buy or sell a security at a specified price or better. Your broker will only execute a buy limit order at the limit price or lower and a sell limit order at the limit price or higher. There is no assurance that your broker will execute your limit order.
Market Order
A market order is buying or selling a security at the best price. Market orders are usually executed quickly, but the exact price is not guaranteed.
Stop Order
You can place a stop order to buy or sell a security when it reaches a specific price, known as the stop price. When the stop price is attained, it becomes a market order. Stop orders are typically used to limit losses or lock in profits.
Stop-Limit Order
You can place a stop-limit order to buy or sell a security at a specified price or better after the stop price is attained. After attaining the stop price, the stop-limit order becomes a limit order and will only be executed at the specified price or better.
Trailing Stop Order
You can place a trailing stop order to buy or sell a security when it reaches a specific price, known as the trailing stop price. The trailing stop price is automatically adjusted as the stock price moves up or down. When the stock price reaches the trailing stop price, the order becomes a market order.
Fill-or-kill order
You can place a fill-or-kill (FOK) order to buy or sell a security that your broker must execute immediately and in its entirety, or it will be cancelled. This type of order is typically used in fast-moving markets where a stock price can change rapidly.
Good-til-cancelled order
A good-til-cancelled (GTC) order is an order to buy or sell a security that remains in effect until the trader cancels it. GTC orders are often used when a trader wants to buy or sell a stock without entering a market order.
Immediate-or-cancel order
You can place an immediate-or-cancel (IOC) order to buy or sell a security that your broker must execute immediately, but only partially, if necessary. Any portion of the IOC order your broker cannot fill immediately will be cancelled.
Limit-on-close order
A limit-on-close (LOC) order is an order to buy or sell a security at the end of the trading day at a specified price, known as the limit price. LOC orders are only executed if the stock’s closing price is at or below the limit price for a buy order or at or above the limit price for a sell order.
Why use orders when trading stocks?
Price protection
When you place a limit order, you know the maximum price you’re willing to pay for a stock or the minimum price you’re willing to sell it for. It protects you from sudden price changes in a fast-moving market.
Time savings
A market order may be the best choice if you’re trying to buy or sell stock quickly. Market orders are typically executed more quickly than other types of orders.
Reduced risk
A stop order protects you from losses if a stock’s price falls below a certain level. You can limit your losses by placing a stop order and exiting the trade if necessary.
Stop-limit orders can also help reduce risk by allowing you to specify the exact price at which you’re willing to buy or sell a stock. This type of order can help prevent you from overpaying on a stock or selling it for too low of a price.
Better execution prices
In some cases, limit orders can help you get a better price for your shares than a market order. If you place a limit buy order for a stock trading at SGD10 per share, and the stock’s price falls to SGD9.50 per share, your broker will execute the order at SGD9.50 per share.
On the other hand, if you place a market order to buy the same stock, you may end up paying SGD10 per share. So, in this case, a limit order saved you SGD0.50 per share.