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Order Type Definitions

from XPRESSTRADE

Introduction

Traders have several choices when it comes to placing orders to buy or sell commodity and financial futures. For example, you can instruct your broker to buy or sell at a specified price. Or you can direct the broker to buy or sell on your behalf immediately, wherever the market is trading right now. You even have control over how long your order will be active in the market place -- you can place an order that is good for one day only or for an extended period.

Understanding how different types of orders work may make a difference in whether your trade gets executed and at what price. If you're not sure how to enter an order, ask XPRESSTRADE -- we're here 24 hours per day during the trading week, and our friendly, knowledgeable representatives are happy to help you!

Please be sure to remember that not all exchanges accept all types of orders. In fact, even within exchanges, some orders are allowed in some markets, but not in others. Again, if you have any questions, we're here to help -- please don't hesitate to contact us!

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Market Order

The market order is the most frequently used order. It is a good order to use once you have made a decision about opening or closing a position. It can keep the customer from having to chase a market trying to get in or out of a position. The market order is executed at the best possible price obtainable at the time the order reaches the trading pit.

  • When buying/selling, you receive the best available market price. As an example, with the market trading at 10400, Buy 1 Dec Dow Jones futures contract @ Market, you receive the best available next traded price.

Order Type Generally Accepted at: CBOT, eCBOT, CME, GLOBEX, KCBOT, MGE, NYBOT, COMEX, NYMEX, ACCESS, OCX, EUREX, HKFE, LIFFE, MATIF, SGX, SFE, WCE, IPE, MEFF, TOCOM, TGE

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Limit Order

The limit order is an order to buy or sell at a designated price. Limit Orders to buy are placed below the market while limit orders to sell are placed above the market. Since the market may never get high enough or low enough to trigger a limit order, a customer may miss the market if he uses a limit order. (Even though you may see the market touch a limit price several times, this does not guarantee or earn the customer a fill at that price.)

  • When buying, if the order price is lower than (below) the current market price, it is a Buy Limit. As an example, with the market trading at 10400, Buy 1 Dec Dow Jones 10395 on a Limit. This can only be filled at the stated price (10395) or lower (better).
  • When selling, if the order price is higher than (above) the current market price, it is a Sell Limit. As an example, with the market trading at 10395, Sell 1 Dec Dow Jones 10400 on a Limit. This can only be filled at the stated price (10400) or higher (better).

Order Type Generally Accepted at: CBOT, eCBOT, CME, GLOBEX, KCBOT, MGE, NYBOT, COMEX, NYMEX, ACCESS, OCX, EUREX, HKFE, LIFFE, MATIF, SGX, SFE, WCE, IPE, MEFF, TOCOM, TGE

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Stop Order (or Stop-Loss)

Stop orders can be used for three purposes:

  • To minimize a loss on a long or short position;
  • To protect a profit on an existing long or short position; or
  • To initiate a new long or short position.

A buy stop order is placed above the market and a sell stop order is placed below the market. Once the stop price is touched, the stop order is said to have been "elected," will be treated like a market order, and will be filled at the best possible price.

•  When buying, if the order price is higher than (above) the current market price, it is a Buy Stop. As an example, with the market trading at 10395, Buy 1 Dec Dow Jones futures contract 10400 Stop. Can only be filled at the Market, after the Market trades (or is bid) at 10400 or higher.

•  When selling, if the order price is lower than (below) the current market price, it is a Sell Stop. As an example, with the market trading at 10400, Sell 1 Dec Dow Jones 10395 Stop. Can only be filled at the Market, after the Market trades (or is offered) at 10395 or lower.

Order Type Generally Accepted at: CBOT, eCBOT, CME, KCBOT, MGE, NYBOT, COMEX, NYMEX, OCX, EUREX, HKFE, LIFFE, MATIF, SGX, SFE, WCE, IPE, MEFF, TOCOM, TGE

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Stop-Limit Order

Used by the trader who doesn't wish to be filled any worse than his stop price. Here, the stop and limit prices specified on the order are one and the same. This order becomes a straight limit order if, once the stop is elected, the broker is unable to execute the order at the stipulated price or better. Also, a stop limit order will be placed as a straight limit order if, when received by the exchange, the stop price already has been violated.

•  When buying, if the order price is higher than (above) the current market price, it is a Buy Stop. As an example, with the market trading at 10350, Buy 1 Dec Dow Jones futures contract 10400 Stop Limit. Can only be filled at 10400 or better, after the Market trades (or is bid) at 10400 or higher.

•  When selling, if the order price is lower than (below) the current market price, it is a Sell Stop. As an example, with the market trading at 10450, Sell 1 Dec Dow Jones 10395 Stop Limit. Can only be filled at 10395 or better, after the Market trades (or is offered) at 10395 or lower.

Order Type Generally Accepted at: CME, GLOBEX

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Stop-with-Limit Order

Used by the trader who wishes to give the floor broker a limit as to how far through the specified stop the order may be filled. Two prices must be stipulated when the order is placed -- the stop price and the limit price. When the stop is elected, the order will be filled if it is possible to do so without exceeding the limit price. If this isn't possible, the order becomes a working limit order. Also, a stop with limit order will be placed as a straight limit order if, when received by the exchange, the stop price already has been violated.

Order Type Generally Accepted at: CME, GLOBEX

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Stop Close Only (SCO)

The stop price on a stop close only will only be triggered if the market touches the stop during the close of trading. The disadvantage of this order is that a fast market in the last few minutes of trading may cause the order to be filled at an undesirable price. It can, however, protect the customer from getting filled during adverse price fluctuations during the course of the day.

Order Type Generally Accepted at: CME

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Market If Touched (MIT)

MITs are the opposite of stop orders. Buy MITs are placed below the market and Sell MITs are placed above the market. An MIT order is usually used to enter the market or initiate a trade. An MIT order is similar to a limit order in that a specific price is placed on the order. However, an MIT order becomes a market order once the limit price is touched or passed through. An execution may be at, above, or below the originally specified price. An MIT order will not be executed if the market fails to touch the MIT specified price.

Order Type Generally Accepted at: CME

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Good Till Cancelled (GTC)

Good Till Cancelled (or Open Order). Used in conjunction with a Limit or Stop order. Order will remain valid and worked until client cancels order, or it is filled, or contract expires. GTC orders do not cancel automatically -- they remain working in the marketplace until executed or until cancelled by the trader.

•  As an example, you are long 1 Dec Dow Jones futures contract and have a GTC order to sell 1 Dec DOW JONES @ 10400 Stop. You decide to sell your 1 long Dec Dow Jones on a Market order. Your GTC order must be cancelled, or you will sell (short) 1 Dec Dow Jones if the market trades (or is offered) at 10400 or lower.

If an order is not designated Good Till Cancelled, it is a Day Order and will expire at the end of the current trading session unless filled or cancelled prior to the close.

Order Type Generally Accepted at: CBOT, CME, GLOBEX, KCBOT, MGE, NYBOT, COMEX, NYMEX, EUREX, HKFE, LIFFE, MATIF, SGX, SFE, WCE, IPE, MEFF, TOCOM, TGE

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One-Cancels-Other (OCO)

When one order is executed, the other is automatically cancelled. As an example, with the market trading at 10400 you want to buy at 10390 Limit (lower), or on an upside breakout at 10410 Stop (higher), Buy 1 Dec Dow Jones 10390 on a Limit, OCO Buy 1 Dec Dow Jones 10410 Stop.

Order Type Generally Accepted at: CBOT, eCBOT, CME, GLOBEX, KCBOT, MGE, NYBOT, COMEX, NYMEX, ACCESS, OCX, EUREX, HKFE, LIFFE, MATIF, SGX, SFE, WCE, IPE, MEFF, TOCOM, TGE

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Market on Close (MOC)

This is an order that will be filled during the final minutes of trading at whatever price is available. PLEASE NOTE: A FLOOR BROKER RESERVES THE RIGHT TO REFUSE AN MOC ORDER UP TO FIFTEEN MINUTES BEFORE THE CLOSE DEPENDING UPON MARKET CONDITIONS.

Order Type Generally Accepted at: CBOT, CME, KCBOT, MGE, NYBOT, COMEX, NYMEX

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Cancel Order (CXL-Requested)

All orders, except Market Orders, can be cancelled and replaced with a different order unless filled prior to cancellation. As an example, you are long 1 December Dow Jones futures contract and have a GTC order to sell 1 Dec Dow Jones @ 10300 Stop. With the market trading at 10350, you decide to sell your 1 long Dec Dow Jones contract using a Market order, Sell 1 Dec Dow Jones @ Market, and cancel selling 1 Dec Dow Jones 10300 Stop on GTC order No. 12345.

Please be aware of the fact that when a trader submits a cancel order, he or she has requested that the order be cancelled. This does not mean that the order necessarily has been cancelled or that the order will be able to be cancelled successfully. It simply means that you've instructed the broker to attempt to cancel the order. Even though you've attempted to cancel a working order, it's conceivable that the order might already have been executed in the marketplace but not yet reported to you. This is not uncommon, for instance, in open-outcry trading pits during periods of extreme volume or volatility. Under such circumstances, the floor broker handling your order in the trading pit may have become so busy that he or she simply hasn't had time to "endorse" the order and send the fill confirmation back to us. In this case, when the fill confirmation ultimately is received, the order will be considered "Too Late to Cancel," or "TLTC."

Order Type Generally Accepted at: CBOT, eCBOT, CME, GLOBEX, KCBOT, MGE, NYBOT, COMEX, NYMEX, ACCESS, OCX, EUREX, HKFE, LIFFE, MATIF, SGX, SFE, WCE, IPE, MEFF, TOCOM, TGE

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Spread Order

The customer wishes to take a simultaneous long and short position in an attempt to profit via the price differential or "spread" between two prices. A spread can be established between different months of the same commodity, between related commodities or between the same or related commodities traded on two different exchanges. A spread order can be entered at the market or you can designate that you wish to be filled when the price difference between the commodities reaches a certain point (or premium).

•  For example: Buy 1 June Live Cattle, Sell 1 August Live Cattle, Plus 100 to the August Sell Side. This means that the customer wants to initiate or liquidate the spread when August Cattle is 100 points higher than June cattle.

Order Type Generally Accepted at: CBOT, eCBOT, CME, GLOBEX, KCBOT, MGE, NYBOT, COMEX, NYMEX, ACCESS, OCX, EUREX, HKFE, LIFFE, MATIF, SGX, SFE, WCE, IPE, MEFF, TOCOM, TGE

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Fill or Kill Order (FOK)

The fill or kill order is used by customers wishing an immediate fill, but at a specified price. The floor broker will bid or offer the order three times and immediately return either a fill or an unable.

Order Type Generally Accepted at: CBOT, CME

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"Not Held"

A term for an order submitted to a brokerage firm with the understanding that it will use its best efforts to execute the order according to the customer's instructions, but the broker may not be held responsible or liable for any lost profits, trading losses, or damages resulting from the manner in which the order is handled. XPRESSTRADE accepts contingent orders strictly on a "Not Held" basis, for instance, because they are special orders.

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