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The language of trading
Order types are how you communicate your intent to the market. Using the wrong order type can cost you money through slippage, missed entries, or unintended executions. Master these, and you control exactly how your trades get filled.
Why Order Types Matter
Imagine you want to buy Reliance at ₹2,450 but you place a market order when the price is spiking. You might get filled at ₹2,480 — that is ₹30 per share of "slippage" eating into your profits. The right order type prevents this.
1. Market Order
A market order buys or sells immediately at the best available price. You are saying: "I want this stock NOW, I do not care about the exact price."
Market Order Execution
When to use
- +Highly liquid stocks (Reliance, TCS, HDFC Bank)
- +When speed matters more than price
- +Exiting a losing position urgently
When to avoid
- -Illiquid or small-cap stocks
- -During volatile openings (9:15-9:20)
- -Large orders in low-volume stocks
2. Limit Order
A limit order sets the maximum price you will pay (for buys) or the minimum price you will accept (for sells). You are saying: "I want this stock, but ONLY at my price or better."
Limit Order — Price Threshold
Limit orders are the most commonly used order type by experienced traders. You always know the worst price you will get. The trade-off? Your order may never fill if the stock does not reach your price.
3. Stop Loss Order (SL)
A stop loss is your safety net. It automatically sells your position if the price falls to a certain level, limiting your loss. Think of it as an insurance policy for your trade.
Stop Loss Trigger Mechanism
Never trade without a stop loss
A single trade without a stop loss can wipe out months of profits. In Indian markets, stocks can gap down 5-10% overnight on bad news. Your stop loss is your first line of defense.
Two Types of Stop Loss on Indian Brokers
SL Order (Stop Loss Limit)
Has two prices: Trigger Price + Limit Price
- Trigger Price: activates the order
- Limit Price: worst price you accept
- Risk: may not fill if price gaps past limit
SL-M Order (Stop Loss Market)
Has only Trigger Price, executes at market
- Trigger Price: activates the order
- Becomes a market order once triggered
- Guaranteed fill but possible slippage
4. Bracket Order (BO)
⚠️ Important Update
Bracket Orders (BO) have been discontinued by most major brokers including Zerodha (2020), Angel One, and Groww. Cover Orders (CO) are also being phased out. Use GTT (Good Till Triggered) orders instead for automated stop-loss and target management.
A bracket order is an all-in-one order that places your entry, target, AND stop loss simultaneously. It "brackets" your trade with predefined exit points in both directions.
Bracket Order Structure
When one exit triggers (target or SL), the other is automatically cancelled
5. Cover Order (CO)
A cover order is a simplified bracket order — it has an entry and a stop loss, but no target. You must exit manually or let the market close square off your position. Cover orders get reduced margin requirements because the risk is defined by the stop loss.
6. After Market Order (AMO)
AMO lets you place orders after market hours (3:30 PM to 9:00 AM). The order is queued and sent to the exchange when the market opens. Useful if you analyze stocks at night and want to place orders for the next morning.
AMO tip
Always use limit orders for AMO, not market orders. The opening price can be very different from the previous close due to overnight news, global markets, or GIFT Nifty movements.
7. Day Order vs Good Till Cancelled (GTC)
Day Order (Default)
Valid only for the current trading day. If not filled by 3:30 PM, the order is automatically cancelled. Most orders on Indian brokers are Day orders by default.
Good Till Cancelled (GTC)
Stays active until filled or you manually cancel it. Available on some brokers (Zerodha GTT). Great for setting buy orders at support levels and waiting for the stock to come to your price.
8. GTT (Good Till Triggered) — Zerodha's Innovation
GTT is Zerodha's version of GTC that stays active for up to 1 year. You can set:
- Single trigger: Buy if stock falls to ₹X, or sell if it rises to ₹Y
- OCO (One Cancels Other): Set both a target AND stop loss — whichever hits first, the other is cancelled
GTT is perfect for long-term investors who want to set "buy the dip" orders at specific prices without watching the market every day.
Understanding Slippage
Slippage is the difference between the price you expected and the price you actually got. It happens most with market orders in volatile or illiquid conditions.
Slippage Example
Order Types Comparison
| Order Type | Speed | Price Control | Best For |
|---|---|---|---|
| Market | Instant | None | Urgent exits, liquid stocks |
| Limit | May not fill | Full control | Most trades, planned entries |
| SL / SL-M | Trigger-based | Partial (SL) / None (SL-M) | Loss protection, breakout entries |
| Bracket | Instant | Full (entry + exits) | Intraday with defined risk |
| Cover | Instant | Entry + SL only | Intraday, reduced margin |
| AMO | Next day open | Limit recommended | Working professionals |
| GTT | Up to 1 year | Full control | Long-term buy/sell targets |
Common Order Type Mistakes
Market Order on Illiquid Stock
Placing a market order on a stock with low volume can fill at terrible prices. A stock showing ₹100 on screen might fill at ₹105 or ₹95 due to wide bid-ask spread.
Stop Loss Too Tight
Placing SL too close to your entry gets you stopped out by normal market noise. Give your trade room to breathe — use ATR-based stops instead of arbitrary numbers.
Forgetting Day Order Expiry
Your limit order at ₹450 was not filled today. Tomorrow it is gone — you need to place it again. Use GTT for multi-day orders.
Wrong Order Type for Expiry
Using limit orders on expiry day for options can mean missing exits. Use market orders for F&O on expiry when time is critical.
Practical Tips for Indian Traders
Default to Limit Orders
Unless you are in a rush, always use limit orders. Even placing your limit 1-2 ticks above market price gives you more control than a market order.
Always Place a Stop Loss
The moment you enter a trade, your next action should be placing a stop loss. Use bracket orders to enforce this discipline automatically.
Use GTT for Investment Targets
Set GTT orders at your target buy prices for quality stocks. When the next market correction comes, your orders will trigger automatically while others are panic selling.
Avoid Market Orders at Open
The first 5 minutes (9:15-9:20) have the widest spreads and highest slippage. Wait for the market to settle or use limit orders.
Test with Small Orders First
If you are unsure about an order type, test it with a small quantity (1 share) to see how it behaves before placing your full position.
What to Learn Next
- Stop Loss Strategies — Advanced stop loss placement techniques
- Market Hours — When different order types work best
- Risk Reward Ratio — Set proper targets with your bracket orders
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