Definition§
An “Open Order” is a type of trade order that is either for buying or selling securities and is yet to be executed or canceled. Such orders remain active and open until they are filled or until the investor decides to cancel them. In some cases, the order might be automatically canceled due to the time constraints or other conditions specified by the trader.
Examples§
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Good-Till-Canceled (GTC) Order: An investor places a GTC order to buy 100 shares of Company XYZ at $50 per share. The order remains open until it is either executed at the specified price or canceled by the investor. If the trade never reaches $50, the order stays open indefinitely, unless the broker limits the maximum duration.
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Limit Order: A trader sets a limit order to sell 200 shares of Company ABC at $60 per share. The order remains open and will only be executed when the market price reaches or exceeds $60.
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Stop Order: A trader initiates a stop order to buy shares of Company LMN at $25 per share should the price rise to that point. The order remains open until the price condition is met and the order is executed.
Frequently Asked Questions (FAQs)§
What happens to an open order at the end of the trading day?§
Open orders can either be day orders or good-till-canceled orders. A day order expires at the end of the trading day if it is not filled, while a GTC order remains active until the conditions for execution are met or the order is canceled manually.
Can I modify an open order?§
Yes, traders can often modify open orders to adjust the price, quantity, or other conditions. However, this depends on the brokerage platform and regulations in place.
Are there any risks associated with open orders?§
Yes, market conditions can change, and prices can move unfavorably impacting the outcome of an open order. It’s crucial to monitor open orders regularly to ensure they align with current investment strategies.
How do I cancel an open order?§
Most brokerage platforms enable the cancellation of open orders via their trading interface. The specific steps can vary, so it’s advisable to check the instructions provided by the respective broker.
Do open orders affect the stock price?§
Large open orders can influence stock prices if the volume is significant enough to impact market supply and demand dynamics.
Related Terms§
Good-Till-Canceled (GTC) Order§
A type of order that remains active until the investor decides to cancel it or the order is filled automatically.
Limit Order§
An order to buy or sell a security at a specified price or better.
Stop Order§
An order to buy or sell a security once its price reaches a specified level.
Market Order§
An order to buy or sell a security immediately at the best available current price.
Online References§
Suggested Books for Further Study§
- “Trading and Exchanges: Market Microstructure for Practitioners” by Larry Harris
- “A Beginner’s Guide to Forex Trading” by Matthew Driver
- “Market Wizards: Interviews with Top Traders” by Jack D. Schwager
