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Trading Basics: Futures Order Types

Future order types allow retail traders to enter orders that meet their trading criteria and determine what price and how the orders will be filled. Market orders, limit order, MIT orders and stop orders are the most common orders submitted through your broker. It is very important that you understand the type of orders you are submitting before trading live.

Market Orders

The two most common future order types you’ll see are Limit orders and Market orders. A market order doesn’t specify a price, it is executed at the best possible price available. This order type can keep the trader from "chasing" the market. Market orders help prevent orders from being filled at extremely high prices.

Normally liquid markets like the E-Mini Nasdaq 100 have narrow bid-ask spreads. The day trader gets filled quickly at current prices in the market, which is reflected in their trading platform. However in markets with wide range spreads and lower volume, the day trader might find their orders get filled at higher prices if they are buying, or a lower price if they are selling.

Limit Orders

Limit orders are orders to sell or buy at a designated price. Limit Orders to “buy” are placed below the current price while limit orders to “sell” are placed above the current price. A limit order may touch a limit price several times and may or may not be filled. A limit order will get you in the market at the best possible price. Partially filled limit orders can happen often. The remaining quantity remains on the books at the specified limit price.

There is no guarantee to get filled at a specific price. In most instances, the market must trade better than the limit price for the trader to get filled.

We feel limit orders are risky because you tend to be going against a trend or “momentum”. So trade limit orders with caution. However, they do have their place in the markets when conditions are met in your trading plan.

Market If Touched (MIT)

An MIT order is comparable to a limit order in that a specific price is placed on the order. A buy MIT order is placed below the current market price and sell MIT are placed above the current market price. However, an MIT order always becomes a market order once the limit price is touched. An execution may be at, above, or below the originally specified price.

Stop Orders

A futures order that notifies your broker to sell or offset your position at the market price is a Stop Market Order. When price moves higher (in a short position) or lower (in a long position).

Stop orders are used to:

1. Minimize a loss on a short or long position

2. Used to protect profits

3. To initiate a new position

Stop Limit Orders

Stop limit orders work like a stop market order but once triggered it becomes a limit order at the price you specified. This can be very risky because you really don't know what the market price may be and your limit order has the ability to never get filled if the market price never gets reached.

Stop Close Only

This order is filled when the market touches the closing price at the close of the trading day. This type of order is called a Stop Close Only order or a Stop on Close. This kind of stop will only trigger at the closing of the market, and so the market may easily move against you during the trading day. The market tends to move fast during the closing, and you may be filled at an undesirable price. It can protect the trader from getting filled during adverse price fluctuations.

Market On Opening (MOO):

This is an order that the trader wishes to be executed during the opening range at the best possible price.

Market On Close (MOC):

An order filled during the final minutes of trading at whatever price possible.

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