1.
Market Order: When you use Market Order, you basically tell your broker to get you in or get you out at whatever price that he can get.
For Market Order, what you get is what the market-maker gives you at the price that he wants.
So, you will have to take the risk of not getting the price you desire in exchange for a guarantee of being in the market.
Most of the time, you will instantly get filled.
However, the market-maker will take advantage of this and gives you retail price.
That's why I call it the Guarantee Worst Price Order.
It is highly not recommended to get in a position using Market Order.
However, market order should be utilized to get out of a position at certain market conditions.
2.
Limit Order: Let's say you place a limit order to buy a call option at $2.
00.
This will tell the broker to get you in at $2.
00 or cheaper.
Any price higher than that is a no-no.
If the market moves up and the call option you want re-prices at $3.
00, your limit order will stand idle.
Limit Order is highly recommended to enter an option position.
A lot of the time you can get the price lower than that you initially wanted.
3.
Stop Order: Stop Order will convert to Market Order when the stop-price you set hits.
For example, if you stop-order a put option at $2.
5, it will convert to market order when the price is at $2.
5.
With buying order, the specified price has to be above the current market price.
And with selling order, the specified price has to lower than the current market price.
If stock gaps up pass the stop-price, your buying stop-order will get filled at that market price.
You can get a pretty crappy deal this way.
4.
Stop Limit Order: This is different from original stop order.
Stop Limit Order converts yours to Limit Order.
It is safer because if stock gaps, you are protected by the limit-price.
5.
Day Order: Day Order's lifespan is only during a trading day.
Market in the US opens at 9.
30am and closes at 4.
00pm EST.
This means your day order only lasts until 4.
00pm.
It will be canceled after that.
6.
GTC Order: GTC stands for Good Till Cancel.
However, any experience traders will tell you Good Till Cancel is more like Good Till Remember.
The order hits the floor and the market-maker doesn't pay a lot of attention to it because it has no time pressure to keep him on his knees.
You as a trader holding a GTC order will be more likely to forget what you ordered.
You wouldn't want to open your account one day and see an order you forgot about got filled.