What is day and IOC in trading: A stock market is a fast-paced place where hundreds of participants buy and sell shares at any given moment during market hours.
These orders are carried out in different ways in the market according to the requirements of the individuals. Two such types of orders are day orders and IOC orders.
In this article, we will discuss what is day and IOC in trading and we’ll also discuss the pros of each type of order.
What Are Limit And Market Orders?
Before mentioning the validity of the orders in the market, let us take a look at the ways of executing orders in the stock market:
1. Market Order
A market order is the type of order that lets you buy or sell a security at the best price currently available in the market. The bid or offer price is not specified while placing a market order.
The buy or sell order gets executed at the best price the sellers or buyers are willing to offer in the market. The benefit of market orders is that your trades will be executed as soon as it reaches the exchange.
But on the downside, instant execution of orders comes at the cost of slippage which means you would be paying slightly more or receiving slightly less while buying or selling the securities.
2. Limit Order
A limit order is the type of order that lets you buy or sell a security at a specified price in the market.
Here, the bid or offer price at which you want to execute your order needs to be specified. The buy or sell order gets executed only when the counter order matches your order or there is a better counter order.
The benefit of limit orders is that your trades will be executed at your desired price. But on the downside, there is a probability that your order may not get executed partially or completely depending upon the counter orders available in the market.
Now that we have understood the ways of placing an order in the market, let us now understand what is day and IOC in trading
What Is Day And IOC In Trading?
Now that we have covered the type of execution for securities, let us now take look at what is day and IOC in trading
1. Day Order
A Day order is a type of trading order that individuals give to their broker to buy or sell a security that is valid for a single day on which it is entered.
If the specified order is not executed during the day, the order will automatically get canceled by the trading system at the end of the day.
Day orders are used by most brokers and trading platforms as a default means of trading. This means that an unexecuted trade will expire at the end of the trading day unless a different time frame is specified.
Example Of Day Order
Suppose you want to buy 100 shares of XYZ company which are currently trading at Rs 1000. But you expect the price of the shares to fall to Rs 970 before it makes any further upward momentum.
Because you do not have time to monitor the stock price throughout the day, you can set a day order to buy the shares with a limit of Rs. 970 per share.
If the price falls to the level of Rs. 970 or lower during the day, your order will automatically get executed in the market. In the case of a Day market order, the buy or sell orders will get executed immediately after entering the order.
Pros Of Day Orders
- The benefit of placing a day order is that individuals do not need to constantly monitor if their orders have been executed.
- Day orders are especially useful for positional traders who place multiple orders in a day as they get executed automatically throughout the day and do not require constant monitoring
2. Immediate Or Cancel (IOC)
An Immediate or Cancel order is a type of trading order that allows individuals to buy or sell a security as soon as the order is released in the trading system.
In this system, your orders get executed as soon as they are placed and the unmatched order will be canceled immediately. IOC also enables partial execution of the orders and cancels the unmatched portion of the order immediately.
Example Of Immediate Or Cancel Order
Suppose you place an IOC market order to buy 100 shares of XYZ ltd and the order book shows that 200 shares are offered at Rs. 190 and 50 shares are offered at Rs. 191.
The order will immediately fill 50 shares at the offer price of 191 and cancel the unfilled portion of 50 shares. Suppose you place another IOC limit order to buy 100 shares of XYZ ltd at a limit of Rs. 189 and the share is currently trading at Rs. 191.
If there are no sellers available with an offer price that matches your order, it will get canceled immediately.
Pros Of IOC Orders
- The benefit of placing an IOC order is that it enables the immediate execution of your order and does not require you to wait.
- It also gives you a provision of partial execution of an order.
- IOC orders are also useful when placing large orders in the market. Large orders influence the price of the security when they are open for too long in the market. As IOC executes orders immediately, it will prevent such large impacts.
In this article, we discussed market orders and limit orders and also covered what is day and IOC in trading along with its pros and examples.
An individual can place orders based on their personal preferences. If individuals have time to monitor the market, they can select IOC orders and the ones who do not have the time can opt for daily orders.
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