Order supplement

Order additions or trading options are terms belonging to stock exchange usage that describe a security order more precisely and set certain conditions under which this order is to be executed.

There is generally a distinction between unlimited and limited orders. Other typical additions are the period of validity and the time of execution (e.g. during ongoing trading or only during auctions). There are also a number of additions that can regulate the details of the execution.

Reasons for using order supplements

Order supplements allow fine-tuning of the securities order. The best-known addition is the limit, which indicates a maximum price for the buy order or a minimum price for the sell order. So it can make sense to specify a limit, even if you actually want to have a best execution, i.e. at the next possible price, in order to exclude unexpected price jumps.

Another addition that must almost always be specified is the period of validity of the order. This can e.g. B. the current trading day ( good for day ), immediately ( fill or kill ) or a date in the future ( good till date ).

Depending on the trading venue, additional fees may also apply if an order is not executed in full but in several parts. Such partial executions can be prevented by adding the AON ( all or nothing ).

With two interdependent orders, e.g. B. a stop loss and a limit sale in order to realize profits when a price is reached, the OCO addition ( one cancels the other ) can be used to execute the corresponding order on the "other side" to cancel.

A well-known technique to limit losses is to place a stop-loss order on an existing long position . This technique is u. U. psychologically sensible for inexperienced small investors who also spend little time following the stock market. In the case of larger volumes, however, it is no longer sensible to place such unlimited orders. Critics also criticize the fact that the increasing use of this technology has meanwhile become ineffective again, since prices suddenly collapse when they are reached - apparently more sensible - stop-loss levels and then - after the sales pressure has subsided due to these automated orders - quickly again recover on courses about it. Setting a trailing stop loss in order to secure profits with rising prices is also controversial, since the volatility of the underlying has to be predicted for the trailing distance.

Order additions to the price

Limited and unlimited orders

The two simplest order additions are "best" or "unlimited" and "limit":

Market order (unlimited, also cheapest or best)

The order will be executed at the next possible price. This is the lowest sell offer for buy orders or the highest buy offer for sell orders.

Since the execution price is not known in advance, it is also unknown at what total price the order will be executed. In most of the regulated stock exchange segments, successive prices may only be quoted within a certain deviation (e.g. ± 5%), so that a very large deviation from the last price is excluded even with unlimited orders.

Limit order

The order is only executed if the price falls below or exceeds the previously specified limit: For buy orders, the price must be at or below the limit, for sell orders, the price must be at or above the limit.

In contrast to unlimited orders, by specifying a limit, the maximum or minimum amount for the entire order is known and cannot be exceeded or fallen below.

Stop addition

With the addition of "Stop", an order can be set that will remain in place until a certain price, the stop price, has been reached. Strictly speaking, the order is converted into another order when the stop price is reached. In the case of buy orders, the conversion takes place as soon as the stop price has been exceeded; conversely, in the case of sell orders, the conversion takes place when the stop price is undershot.

Trailing addition

The addition of “trailing” means that the execution price of an order never exceeds a certain distance from the current price. i.e., it is being dragged behind the course. The distance can be specified relatively (e.g. 5%) or also absolutely (e.g. € 20). The execution price of the order is then automatically adjusted so that it is never greater than the specified distance.

Depending on the order, the execution price of a trailing order can only rise or fall. A typical example is the trailing stop-loss order, in which the stop price is always pulled behind the maximum price at a certain distance and is converted into a market sell order if the stop price is not reached. It can be used to automatically secure part of the price profit and sell it when the price has dropped by the trailing distance from its maximum value. Conversely, however, there can also be trailing limit buy orders, which are also always dragged behind the maximum price at a certain distance.

Combinations

Depending on the trading venue, the above-mentioned additions can also be combined with one another. A well-known combination is the stop-loss order. It can be used to close an existing long position if the price falls below a certain level.

Stop loss

An unlimited sell order that is activated as soon as the price exactly reaches the specified threshold or falls below this threshold. However, since it is an unlimited order, the execution price can then also be below the stop price.

Example:

Current rate: € 100, stop rate: € 90.

The price falls to € 90 or below, the stop order is converted into an unlimited sell order.

The next available price is € 85, the sell order is then executed at € 85. It would also be possible - depending on the order book - for the order to be executed at € 90 or € 91, for example.

Stop buy limit

A buy order that is converted into a limit buy order when the stop price is exceeded.

Example:

Current price: € 100, stop price: € 110, limit: € 105

The price rises to or above € 110, the order is converted into a limit buy order and only executed if the price then falls back to € 105 or below.

Cash auction

If an order is marked with the additional order cash auction , it is traded in cash or auction trading. The prerequisite is that spot prices are formed for the values ​​traded accordingly or that a cash auction is planned. The spot prices are formed in auctions that take place around four times a day.

Further order additions

The following order additions are also known, the English abbreviations are also used in German systems:

MOO (Market on open)

This is an unlimited market order that should be executed right at the beginning of the trading day. This order type has priority over normal market orders. These orders must be entered before the market opens.

MOC (Market on close)

This is an unlimited market order that should be executed at the end of the trading day. This order type has priority over normal market orders. These orders have to be entered before the market closes, many brokers only allow such orders from 1/2 hour before close.

AON (All or nothing / All or none)

With this order addition, partial executions can be avoided. You determine that either the entire number is filled or nothing at all. If this is not possible, the order remains in the system for later execution. However, this order type has a very low priority; all other unlimited and limited orders are executed before this. This type of execution is offered by the German Tradegate Exchange and US stock exchanges. In connection with a stop market order, however, this type of execution is sometimes not accepted.

IOC (Immediate or cancel)

This is to request that the order be carried out in whole or in part immediately. Further partial executions cannot occur with this type of order, since partial orders that cannot be executed immediately are deleted.

FOK (fill or kill)

A combination of AON and IOC orders: If the entire required quantity cannot be immediately executed (“filled”) at the limit price, the order will be deleted. Neither IOC nor FOK prevent the (spurious) partial executions that occur via XETRA, ie an order is executed in full, but this can be done (fully automatically) in several parts.

OCO (One cancels the other)

A combination of stop loss and sell limit; as soon as either the set limit or the stop price is reached, the order is executed and the other order is deleted.

TS (trailing stop)

A trailing stop order is an order in which the stop limit is automatically adjusted.

BOC (Book-or-Cancel)

An order is only placed in the book if it cannot be executed immediately. This order type is used in particular to build up liquidity in the order books.

Order validity

The additions to the order validity indicate the period in which an order should apply and can therefore be executed.

DAY or GFD (Good for day)

Valid for the day - This order is only valid for the respective trading day. It is automatically deleted when the market closes.

GTD (Good till date)

Until a Specific Day - This order is valid until the specified Dealing Day.

GTC (Good till canceled)

Until further notice - In contrast to daily orders ("DAY" or "GFD"), the order is valid until it has been executed in the selected period or it is deleted from the exchange or by the market participant. The maximum period of validity is 90 days.

Ultimo

The order is valid until the end of the current month.

See also

• Course supplement

Individual evidence

1. ↑ Mark Dworatzek: The logic of the AON order. In: day-trading.de. Retrieved September 9, 2013 . 
2. ^ Conditions for business on the Tradegate Exchange. (PDF; 118 KB) Tradegate Exchange , January 3, 2018, accessed on May 21, 2020 . 
3. ↑ Deutsche Börse makes Xetra more efficient. (No longer available online.) In: deutsche-boerse.com. June 28, 2010, archived from the original on May 20, 2016 ; Retrieved July 31, 2011 . Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.