In this chapter, we will be discussing various types of orders available for day trading. You all already know that you can buy or sell financial assets for day trading like stocks, futures, commodities, currencies, etc. Market buy order and sell order are the most basic types of orders. But there are few other types of orders with a specific purpose in the market. So let’s start with the basic types of orders.
Basic types of orders
Take a look at the below image. It shows the most basic type of buy order in stock markets.
As you can see, it shows product type investment, order type is buy, exchange name, script name, quantity, disclosed quantity, price and trigger price, etc. Below trigger price, it’s written normal and validity it shows as GFD. A GFD order means good for the day order and it is valid till the end of the day’s trading session. If you are taking a positional trade or going to hold your position, you will be using this basic type of investment orders.
But for day trading you will be using another order type called big trade or day order. You will get leverage on these types of orders when you day trade. Take a look at the below image.
So this is a big trade order example which is used by day traders. The next type of order is a Bracket order and BracketTSL order.
In few trading platforms, bracket order is also called a cover order. The below image displays a Bracket order and BracketTSL order type in the dropdown.
Now if I select bracket order you will three another boxes opening up and it asks for a stop-loss price, limit loss to and book profit price. Order type shows sell above the boxes.
This means when you place a bracket/cover order, you have to place your stop-loss price and target price at the same time. There is another box which asks for the “Limit Loss To” price. Adding limit loss to price creates a range for your stop loss if in case the price at which you kept stop loss is not traded. It’s called jumping of price. This helps in reducing the risk involved in leverage trading.
A bracketTSL order stands for Bracket trailing stop-loss order. BracketTSL order has one additional feature which allows you to trail your stop loss. In the below image example, you can see an additional box that displays trailing stop loss condition. Below that start trailing stop loss at market price is displayed. If you place this order with the market price, as soon as your buy order is triggered, you stop loss will start trailing.
For example, if you bought a stock at 100 and your stop-loss is 98, for every price movement of 1 upside, your stop loss will move up by that point. So when the stock price reaches 101, your stop loss will automatically shift to 99 and so on.
Another option in this Bracket TSL is “When price reach”.
Here you can give a price at which you want to start trailing your stop loss. So for example, if you give 102 inside “When price reach” to, your stop-loss order will start trailing only when the price reaches 102. Then for every one rupee move after price reached 102, your stop loss will also move up by that price. So at 103, your stop loss will become 99 and so on. Now you have seen all major types of orders in day trading now its time to read Chapter 4- Stop loss in day trading.