1. The Order Type Menu
Most brokers offer 5-10 order types, but most retail traders only use market and limit orders. Understanding the full menu helps you execute better, manage risk, and avoid costly mistakes.
2. Market Order (MKT)
What it does: Executes immediately at the best available price.
When to use: When you need certainty of execution over price — e.g., exiting a losing position quickly.
Risk: In illiquid stocks or volatile markets, you may get a terrible fill. The "best available price" could be far from the last traded price.
Example: Stock last traded at ₹100. You place a market buy. The lowest seller is at ₹102. Your fill price is ₹102 — a 2% slippage.
3. Limit Order (LMT)
What it does: Executes only at your specified price or better.
When to use: When price matters more than speed — e.g., buying at support or selling at resistance.
Risk: Your order may never execute if the price doesn't reach your limit.
Example: Stock at ₹100. You place a limit buy at ₹98. If the stock drops to ₹98, your order executes. If it keeps rising, you miss the trade.
4. Stop-Loss Order (SL)
What it does: Becomes a market order when the stock hits your trigger price.
When to use: To limit losses on a position.
Risk: In a gap-down, your stop-loss triggers at the market open price, which could be far below your stop price.
Example: You bought at ₹100 with a stop-loss at ₹95. Bad news hits overnight. Stock opens at ₹90. Your stop-loss triggers at ₹90, not ₹95.
5. Stop-Loss Limit (SL-L)
What it does: Becomes a limit order (not market order) when the trigger price is hit.
When to use: When you want to control the exit price, not just the trigger.
Risk: If the price gaps through your limit, your order may not execute at all — leaving you exposed.
6. Bracket Order (BO)
What it does: A 3-legged order: entry + stop-loss + target. If one leg executes, the others are cancelled automatically.
When to use: Day trading with predefined risk-reward.
Example: Buy at ₹100, target ₹105, stop ₹97. If price hits ₹105, you profit ₹5 and the stop is cancelled. If it hits ₹97, you lose ₹3 and the target is cancelled.
7. Cover Order (CO)
What it does: A 2-legged order: entry + compulsory stop-loss. Higher leverage is offered because the stop-loss is mandatory.
When to use: Intraday trades where you want maximum leverage with automatic risk control.
8. After Market Order (AMO)
What it does: Placed outside market hours, executed when the market opens.
When to use: Reacting to overnight news, or when you can't trade during market hours.
9. Order Type Comparison
| Order Type | Execution Certainty | Price Control | Best For |
|---|---|---|---|
| Market | High | None | Liquid stocks, urgent exits |
| Limit | Low-Medium | Full | Entry at specific levels |
| Stop-Loss | High | None (market) | Loss limitation |
| Stop-Loss Limit | Medium | Partial | Controlled exits |
| Bracket | High | Full | Day trading |
| Cover | High | Partial | High-leverage intraday |
💡 Key Takeaway
Market orders guarantee execution but not price. Limit orders guarantee price but not execution. Most retail losses come from using market orders in illiquid stocks or not using stop-losses at all. Master the order type menu before you trade size.