5. Order types
The futures market has many order types and a trader can use them to manage his risk:
Market Order - No price is specified, fill is guaranteed and order is filled at the best available price. It enables the trader to quickly square his positions, but prices may be bad if the market is illiquid.
Limit Order - A sell order above the current price or a buy order below the current price. The order can be done better, but no worse than the limit price. The trader has better control of his price, but order might not be done if market does not trade there.
Stop Order - An order usually used to limit losses, protect profits or initiate a position at market breakouts. A sell order below the current price or a buy order above the current price, and is executed at market once the stop price is triggered.
Stop Limit Order - Similar to the stop order except that a stop limit order is not executed at market when the stop price is triggered. The trader has to specify a limit price which is the worse price the stop order can be done at. A stop limit order gives the trader better control of his fill but he runs the risk of not having the order filled in a fast market.
Market on open (MOO) - An order executed at the opening price. This function is not supported by many electronic platforms, but dealers usually execute such orders by placing lower sell or higher buy orders during the pre-opening period.
Market on close (MOC) - An order executed at the official closing period. This function is also not supported by many electronic platforms, dealers usually execute such orders manually within 2 mins to market close.
One cancels the other (OCO) - 2 orders are placed at the same time, when one is executed, the other is automatically cancelled.
Good till cancel (GTC) - The order is valid until the trader cancels the order. Usually an order is only good for the session it is placed, but a GTC order will continue running until its done or cancelled.
