Limit type orders refer to a buy or sell order with a limit price. Limit orders overcome thedisadvantage of the market order-namely, not knowing in advance the price at which thetransaction will take place. It means that if the order gets executed, them it will within the limitspecified or at a better rate than that. This order type is accepted by both the exchanges i.e. BSEand NSE.When using a limit order, the investor specifies in advance the limit price at which he wants thetransaction to be carried out. It is always understood that the price limitation includes an "or better" instruction. In the case of a limit order to buy, the investor specifies the maximum price hewill pay for the share; the order can be carried out only at the limit price or lower. In the case of alimit order to sell, the investor specifies the minimum price he will accept for the share; the order can be carried out only at the limit price or higher.
Use of Market and limit order
To safe guard against extreme volatility in the markets, you can put a limit on what price youwould want your order to execute. Generally, limit orders are placed "away from the market." Thismeans that the limit price is somewhat removed from the prevailing price (generally, above theprevailing price in the case of a limit order to sell, and below the prevailing price in the case of alimit order to buy). Obviously, the investor operating in this manner believes that his limit price willbe reached and executed in a reasonable period of time. Therein, however, lies the chief disadvantage of a limit order-i.e. it may never be executed at all. If the limit price is set very closeto the prevailing price, there is little advantage over the market order. Moreover, if the limit isconsiderably removed from the market, the price may never reach the limit – even because of afractional difference. Also because limit orders are filled on a first come first basis, it is possiblethat so many of them are in ahead of the investor’s limit at a given price that his order will never be executed. Thus, selecting a proper limit price is a delicate maneuver.On the other hand a market order is filled at the best possible price as soon as an investor placesthe order and it will not be even possible to cancel the order. However, a limit order may becancelled or modified at any time prior to execution.
Time Limit of Orders
Day Orders or End of Day Orders
A day order is one that remains active only for the normal trading time on that day. Unlessotherwise requested by the investor, all orders are treated as day orders only. Market orders arealmost day orders because they do not specify a particular price. One key rationale for the dayorder is that market conditions might change overnight, and thus a seemingly good investmentdecision one day might seem considerably less desirable the following day.
Good Till Cancel Order
A Good Till Cancelled (GTC) order remains in the system until they are executed or cancelled.These types of orders are used in conjunction with limit orders. However, the system cancels thisorder if it is not traded within a number of days, which is parameterized by the Exchange. In thecase of BSE and NSE, such order expires at the end of settlement in which it was placed.When using a GTC order, the investor is implying that he understands the market mechanics, andtherefore feels sufficiently confident that, given enough time, the order will be executed at the limitprice.
Good Till Date Order
A Good Till Days/Date (GTD) order allows you to specify the number of days/date till which the