Thanks to technology, clients nowadays can easily buy & sell futures via phone, laptop and tablets, as long as there is an internet connection.

However, I noticed that there are still many traders who yet do not really understand the types and functions of market orders. Thus, I would like to write this post to help my clients and the trading public to have better understanding of market orders. :-)

TYPES OF MARKET ORDERS:

1. Buy Limit = You want to buy BELOW the market/best ask price.

Example: Now FKLI market/best ask price is 1768. You wish to Buy/Long at 1765. So you place a Buy Limit 1765 and wait market hit your order.

If the market is volatile/ "hot" your buy limit order maybe executed at even better price of 1,764.5, 1764...or lower! Thats why you can also use this buy limit as a profit target for your sell/short trades. If the market is crashing down too quickly, you will love to gain a few extra points of profits!!

2. Buy Stop = You want to buy ABOVE the market/best ask price.

Example: Now FKLI market/best ask price at 1768. You wish to Buy/Long at 1770. So, you place a Buy Stop 1770 and wait market hit your order.

If the market is volatile/ "hot" your buy stop order maybe executed at 1,768.5, 1,769...or higher. Take note of this nature as you may buy at higher price and may affect your risk:reward ratio.

You also can use this buy stop as a cut loss order for your sell/short trades.

3. Buy Stop Limit = You want to buy ABOVE  the market/best ask price within a range

Example: FKLI market/best ask price is 1,768 and you know buy stop order could buy at prices which is too high for you and thus gave you bad risk:reward ratio. Good news you avoid this with Buy stop limit of 1,768-1,770. If the market is too volatile and unable to buy at 1,770 for you, your order will not be executed until prices goes back down to 1,770 and execute buy for you.

The range between the first and second value can be 0.5pt for FKLI and 1pt for FCPO.
Buy stop limit can be used as a cut loss order for your sell/short trades.

4.Sell Limit = You want Sell/Short ABOVE  market/best bid price

Example: Now FKLI market/best bid price is 1768. You wish to Sell/Short at 1768.5. So you place a Sell Limit 1768.5 and wait market hit your order.

If the market is volatile/ "hot" your buy limit order maybe executed at even better price of 1,769, 1,769.5 or higher! That is why traders also use this sell limit as a profit target for their buy/long trades, everyone love extra profits!

5.Sell Stop = You want Sell/Short BELOW market/best bid price

Example: Now FKLI market/best bid price at 1,768. You wish to sell/short at 1,767 (why? perhaps you are a breakout trader or want extra confirmation of a downtrend.) So you place a sell stop at 1,767 and wait market hit your order.

If the market is volatile/ "hot" your sell stop order maybe executed at 1,766.5, 1,766...or lower.  Take note of this, as this sell stop order may sell for you at lower price than you like and affect your risk to reward ratio.

Another function of sell stop is for cut loss order for your buy/long trades.

6.Sell Stop Limit = You want to sell BELOW the market/best bid price within a range

Example: FKLI market/best ask price is 1,768 and you want to sell lower, for example: 1,767.5 to 1,767. So you can queue a sell stop limit of 1,767.5-1,767 and then wait for the market to hit your order. If the market is too volatile and unable to sell even at 1,767, your order will not be executed until prices goes back up to 1,767 and execute sell for you.

The range between the first and second value can be 0.5pt for FKLI and 1pt for FCPO.
Sell stop limit can be used as a cut loss order for your buy/long trades.

7.Market = Buy/Sell at current ask/bid price

Market orders are simple. If you want to buy at the best ask price at this very second, you can execute a buy at market price order. On the other hand, if you want to sell at the best bid price at this very second, you can execute a sell at market price order.

These buy or sell at market price order can be used as trade entry or trade exit.

There is a limitation to this order, the price executed is determined by how fast you key in the order and your internet connectivity. This types of order are for traders who are comfortable trading in a volatile market, where the bid-ask price keep on changing every millisecond. If you are not comfortable, market orders, you can use limit, stop limits, stop orders.

Checkout the graph below for a quick reference and to help you know which orders to use.

I hope by now you have better understanding on market order types. Protect your risks well and happy trading!

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