Unlike the Cryptocurrencies market, the Stock Market is active for a fixed time bracket, for 5 days a week here in India. And the millions of retail investors participating in the market find it difficult to constantly monitor the market and execute buy and sell orders manually because the majority of retail investors are working-class professionals that invest their money in the Stock Market.
But as a retail investor, you don’t need to constantly monitor the market to open or close positions. There are tools that can easily solve this problem when used efficiently. The simple order that you are familiar with is called a Market order where you buy any stock, or commodity at the current price by specifying the quantity. But there are a lot of different orders in the Stock Market that you can use to your advantage as a working-class retail investor.
We have handpicked the 5 most useful orders in the Stock Market that will help you maximize your profits and capitalize on opportunities that you would have missed otherwise.
Different Types of Orders in The Stock Market (The good ones!)
Here’s the list. The orders are ranked based on their utility-
1. Limit Order
Limit orders are slightly different from the regular market orders. Where in market orders you only specify the quantity and the order is immediately executed at the current price, limit orders allow you to specify the price as well. Sometimes the prices of the stocks or any other asset seem overvalued or undervalued at current levels, Limit orders are perfect for such situations. You can specify the price that you think is right and the orders will execute automatically when the stock or commodity reaches that price.
Let’s consider an example-
Suppose you woke up in the morning and bought some shares of TATA Motors at Rs 200/share as you read somewhere about its positive results this quarter. And you have to leave for work by 10 A.M so you won’t be able to monitor the price all day long.
But you wish to book your profits as soon as the price reaches Rs 225/share. You can place a Limit order with your broker specifying the selling price as Rs 225/share and leave for work. Because now, as soon as the prices reach Rs. 225/share, the order will execute automatically and you will have the profits in your account. Isn’t that great!
2. Stop-Loss Orders
Stop-loss orders are essentially a contingency tool used in the scenario when the direction of the trade is the opposite of what you predicted. These orders are simply designed to limit your losses in the stock market. Stop-loss orders are similar to limit orders in their functioning, you specify the price and the quantity of the stock, or commodity you want to buy or sell.
The only difference between limit and stop-loss orders is that Limit orders are used to open positions and Stop-Loss orders are used to close positions in the stock market.
Let’s understand the functioning of a Stop-Loss Order through an example-
Suppose you took a position at the beginning of the market session and you are not sure of the price movement of the stock due to some speculation around the management of the company.
What if you leave for work and the price takes a nose dive due to some bad news? You can avoid this bottomless loss by using a Stop-loss order. You can set a Stop-loss order, specifying the selling price according to your risk appetite and viola! Your position is bulletproof to such nose dives.
Investors are advised to use Stop-loss to tackle unexpected moves in the market and avoid huge losses.
3. MIS Order
MIS stands for Margin Intraday Settlement or Margin Intraday Square off orders. These orders are used in margin trades where leverage is involved and a margin is paid against the capital. MIS orders are strictly used for intraday trades in Stocks, commodities, and F&Os.
Trades entered using leverage automatically use Margin Intraday Settlement orders and if for one reason or another, you fail to close your position before the end of the Market session, your broker will automatically square off your positions a few minutes before the end of the session. For commodities, the automatic settlement happens 30 minutes before the final bell and for equity, the automatic settlement happens 15 minutes before the end of the session.
MIS orders are primarily used for short trades where you borrow some shares from your broker sell them at a higher price only to buy the shares back at a lower price and return them to the broker.
4. Bracket Order
A bracket Order is simply a combination of a limit order and a Stop-loss order. A bracket order simply puts a floor at the selling price and a ceiling at the buying price. You can set the buying price just like you did in limit orders and the stop-loss is placed in a similar way as we did in Stop-Loss orders.
Bracket orders are one of the most convenient tools to set up a trade and make sure that the position closes in your favor. Having access to bracket orders can be really helpful for working-class retail investors. Bracket orders make systematic execution of strategies possible. It is one of the most useful orders in the stock market.
Let’s consider an example-
Say you identified a stock with massive upside potential and decided to make a trade. You can either manually place a market order to buy the stocks, monitor the market, and then sell the stocks manually when the target hits, or you can place a bracket order specifying the target and the stop-loss and continue doing your regular work.
The choice is yours.
AMOs refer to After Market Orders and yeah you guessed it right! They are tools used to place orders after market hours. AMOs are quite frankly one of the most useful orders for investors who have a primary professional and have to commit a big part of the day to that.
Here’s a table for the market timings for all the different sectors-
|Equity and Cash Market||9:15 AM to 3:30 PM|
|Futures & Options Market||9:15 AM to 3:30 PM|
|Currency Market||9:00 AM to 5:00 PM|
|Commodities Market||10:00 AM – 11:30 PM – April to October|
|10:00 AM – 11:55 PM- Nov to March|
And here are the time-slots for placing AMOs in the respective markets:
|Equity and Cash Market||5:00 PM to 8:59 AM|
|Futures & Options Market||5:00 PM to 9:14 AM|
|Currency Market||5:00 PM to 8:59 AM|
|Commodities Market||12:01 AM to 9:59 AM|
Think of a situation where you are about to have dinner and suddenly read some positive news about a company. Consequently, this will surely push the stock prices higher. But unfortunately, you have to leave for work at 9:00 AM and you will surely miss the opportunity. That’s when you can use AMOs to save the day and place the order right when you read the news.
AMOs are really powerful tools that make investing easier for a lot of people who are preoccupied during market hours.
So now that you are aware of the 5 Most Useful Orders in the Stock Market. You can use them to capitalize on every opportunity and become a better investor.
To learn about safely investing in the stock market you can read our article on Top 5 Safest ways to invest money in the Stock market.
We hope that the article on the Top 5 Most Useful Orders in Stock Market was useful to you and your investment journey in some way.