Stock Broker Orders Explained

While there are many factors which determine whether you gain or lose money on securities trading, a good first step in preventing loss is to place the right orders with your securities broker. The order type filters in the online trading platform comparison make it easy to find brokers by the order types offered.

Here, moneyland.ch explains order types offered by Swiss online trading platforms:

1. Market order

A market order is the most basic type of order. Securities are bought or sold at the best available price at the time that the order is placed. All Swiss online brokers accept market orders.

Example: You place a market order for a stock with a going price of 20 Swiss francs. The broker buys shares in that stock at the best available offers - which may be higher or lower than 20 francs depending on supply and demand.

2. Limit order

When you place a limit order to buy a security, you specify the maximum price which you are willing to pay. The broker only bids up to the specified price, and does not accept offers which exceed your limit.

Example: You place a limit order for a stock with a limit of 10 Swiss francs. The best available offer for that stock is 13 francs, so the broker does not buy it immediately. If the price of that stock fell to your price limit of 10 francs or lower, the broker would buy it at that price.

When you place a sell order, a limit order can be used to specify the minimum price which you want to sell a security for. The broker will not sell the security unless they can get the price you specify (or more).

Limit orders are offered by most Swiss online brokers, including Bank Cler Cornèrtrader, Credit Suisse, Migros Bank, money-net (BEKB), PostFinance, Swissquote, TradeDirect and the Zürcher Kantonalbank.

Important: Limit orders can result in partial fills.

3. Stop order

A stop loss order helps to protect your capital. When you place a stop order for a security, you specify a threshold at which the position should be closed. If the price falls to or below the stop threshold, the broker sells the securities as soon as possible at the best available bids.

Example: You buy a stock for 20 francs using a stop order with an 18-franc stop. If the value of the stock fell to 18 francs or less, the broker would sell the stock for the best price available. Ideally the stock would be sold at 18 francs and you would only lose 2 francs on that stock.

The downside of stop orders is the stop threshold is fixed. They only prevent loss of initial capital, but not loss of capital gains.

Example: You buy a stock for 20 francs using a stop order with an 18-franc stop limit. The price of the stock climbs to 26 francs and then falls steadily. The broker only sells the stock when it reaches the 18-franc stop limit, so you lose 6 francs of gains in addition to the 2 francs of investment capital. A trailing stop order (see below), on the other hand, lets you protect capital gains.

Stop orders can also be used for buy orders. When you place a stop buy order, the broker only buys the security if its price reaches or surpasses the stop price you specify.

Most Swiss securities brokers offer stop orders, including Bank Cler, Cornèrtrader, Credit Suisse, Migros Bank, money-net (BEKB), PostFinance, Swissquote, TradeDirect and the Zürcher Kantonalbank.

4. Stop-Limit-Order

A stop limit order combines a stop order and a limit order. A stop limit order works just like a stop order until the price of the security falls to the stop price you specify. But when that happens, the order becomes a limit order rather than a market order (as is the case with a regular stop order). The order is only filled if the broker can buy or sell at the limit or better.

Example: You place a stop-limit order with a 10-franc stop and an 8-franc limit for a stock with a going price of 15 francs per share. If the price falls to 10 francs, the 8-franc limit order is triggered. The broker will only buy or sell shares in the stock at 8 francs or better. Depending on how the price develops, the order may not be filled or may only be partially filled.

Stop limit orders are offered by some (but not all) Swiss online brokers including Bank Cler, Cornèrtrader, Credit Suisse, Migros Bank, money-net (BEKB), PostFinance, Swissquote, TradeDirect and the Zürcher Kantonalbank.

5. Trailing-stop order

When you place a trailing-stop order, you specify a percentage or points below the going rate rather than a fixed stop price. If at any time the rate falls from its going price by the specified amount, a market order is triggered to buy or sell the securities. Trailing-stop orders are beneficial because they are dynamic. As the price of a security climbs, the trailing-stop threshold automatically climbs with it.

Example 1 (buy): You place a trailing stop buy order with a 2-franc trailing stop. If the price of the stock falls by 2 francs while your order is active, the order becomes a market order and the broker buys the shares at the best available price.

Example 2 (sell):  You place a sell order with a 2-franc trailing stop. The price of the stock climbs from 13 to 18 francs over several months and then begins to fall. As soon as the price of your shares falls past the 2-franc trailing stop threshold to 16 francs, a market order is triggered and your broker sells your shares at the best available bids.

Relatively few brokers offer trailing stops. These include Cornèrtrader, PostFinance, Strateo and Swissquote (Swissquote only offers trailing stop orders for trades on the SIX Swiss Exchange).

6. Trailing-stop-limit order

A trailing stop limit order combines a trailing stop with a limit order. If the price of the security moves past the trailing stop, the order becomes a limit order. The broker will only buy or sell shares at the limit price or better, giving you full control over how much you buy or sell your securities for.

Example 1 (buy): A stock’s going price is 10 francs per share. You place an order with a 2-franc trailing stop limit and a 8-franc limit. If the price of the stock falls by 2 francs while your order is active, the order becomes a limit order. The broker only buys shares offered at 8 francs or less.

Example 2 (sell): You place a sell order with a 2-franc trailing stop and a 17-franc limit. The price of the stock climbs from 13 to 18 francs over several months and then begins to fall. As soon as the price of your shares falls past the 2-franc trailing stop threshold to 16 francs, the limit order is triggered. The broker only accepts offers of 17 francs or more.

Very few Swiss brokers offer trailing-stop-limit orders. These include Cornèrtrader, PostFinance, and Swissquote (only for trades on the SIX Swiss Exchange).

7. One-cancels-other (OCO) order

A one-cancels-other (OCO) order lets you combine two different orders. If one order is fulfilled, the other is cancelled. There are many different combinations of OCO orders. The combinations which can be used depend on which other order types are offered by your broker.

Example: You place an OCO sell order for a security. For the OCO order, you use a trailing stop order with a 5-franc trailing stop loss threshold and a limit order with a 50-franc limit. If the price of the security climbs to the 50-franc limit or higher, the broker sells the stock at the limit or better and the trailing stop order is canceled. If the price of the security falls by 5 francs – the trailing stop loss threshold – the broker sells the security at the best available price and the limit order is canceled.

Very few Swiss brokers offer OCO orders. Brokers which do include: Cornèrtrader and Swissquote (Swissquote only offers OCO orders for SIX Swiss Exchange trades and forex trading).

8. If-done order

An if-done order lets you combine two or more orders, with one being contingent on the other. If and when the first order is fulfilled, the subsequent order takes effect. This lets you set up both the buy and sell orders for positions ahead of opening them.

Example: You place an if-done order made up of a 10-franc limit buy order and a 13-franc limit sell order. If the price of the specified security falls to 10 francs or lower, the broker buys the security, and the limit sell order is activated. If the price of the security climbs to 13 francs or higher, the broker sells the securities.

If-done orders can be used for both buy orders and sell orders in many different combinations, depending on which order types are offered by your broker and accepted by the exchange being used. Swiss online brokers which let you use if-done orders include Cornèrtrader und Swissquote (forex trading only).

9. Broker instructions

There are many specialized functions which Swiss borkers do not offer as order types, but which can be added to available order types as supplemental instructions for greater control. Examples of broker instructions include fill or kill (order is cancelled if it cannot be filled in full), all or none (order remains active until it can be filled in full in one go), good till cancelled (order remains active until you cancel it), good for day (order remains active for 1 trading day), immediate or cancel (order is cancelled if it cannot be filled immediately), and many more.

Using the right instructions can help to prevent losses or unnecessary costs. For example, adding a fill or kill instruction to limit orders prevents partial fills. This instruction is offered by PostFinance and Swissquote, among others.

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