If you have opt for a DIY (Do-it-yourself) share purchase system, the process of buying shares in individual companies would involve either sending a trade order via email or placing them yourself via your brokers online portal.
There are two main order types you should know about and they impact the price and speed of order execution in different ways.
Market Orders: A market order is an order to buy or sell shares at the best available price at the time the order reaches the market. This guarantees that your order is filled, but it might not be filled at the price you intended because the market often moves very fast. However, it’s still subject to the availability of willing sellers and buyers for share equal or more than the size you seek to buy/sell.
Limit Orders: A limit order is an order to buy or sell shares at a specified ‘limit’ price or better. This guarantees that your order will be executed at the price you set or better. Now, the stock might not hit the price you have set, in which case the order will never be filled.
Also, when placing limit orders, you can also indicate its validity duration.
Day Order: This an order valid only for one trading session (the day the order is placed). Such orders do not automatically carry over to the next trading day.
Good Till Canceled (GTC): This orders remain valid and active until they are filled or you cancel them.
Good Till Date: With this you can specify an exact date for the order to expire if it remains unfilled.
Below are examples of the different types of orders.
- Buy 5,000 GUINNESS, Limit = Market, Validity = Day
- Buy 9,000 ZENITHBANK, Limit = N35.00, Validity = GTC
- Sell 1,000 NESTLE, Limit = N1,200.00, Validity = Good Till October 22, 2018