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The Impact of Time and Execution Conditions on Trades

The Impact of Time and Execution Conditions on Trades

Using time and execution conditions can help traders better control how their orders are filled. Time conditions set the duration that you’re willing to wait to fill an order. And execution conditions dictate how the order will be presented to the market, which is helpful when you want to take a very specific action.

Time conditions

Depending on the type of order you place, you can generally apply two basic time conditions:

1. Day orders are valid for the current trading day and expire at the end of the regular trading session if the order hasn't been executed. If a day order is placed after the market has closed, it will be valid beginning the following trading day. Orders are generally considered day orders unless otherwise specified.

Considerations:
Day orders do not extend into extended-hours trading.
 
2. Good-till-canceled (GTC) orders are valid for an extended period of time, or until executed or canceled. At Schwab, a GTC order remains open for 60 calendar days, unless filled or canceled by you during that period. 

Considerations: 

  • GTC orders do not extend into extended-hours trading. 
  • They can be executed over several days, which can increase commission costs, as multiple trades are placed on different days.

Execution conditions

Depending on your investment objectives, you may want to place certain execution conditions on your order. If you have a clear goal—for instance, testing the market or placing a large order without disturbing the price—an execution condition may be an effective tool. However, keep in mind that a good strategy in one situation may be less effective in another and it’s important to understand these before you place your order.

All-or-none (AON)

This condition requires the entire order to be filled at one time. If the entire order can’t be filled all at once, then none of the order will be filled. Note: You can only apply this condition to limit orders, and you must have more than two times the securities round lot quantity (typically 100 shares per round lot).   

  • Advantage: If your trade is executed, your order will be filled all at one time.
  • Disadvantages: For both listed and over-the-counter (OTC) orders, AON restrict flexibility in executing your order. They can delay execution, causing you to miss the market altogether if there are not enough shares available to fill your order. Additionally, an AON order must wait behind orders without execution conditions.

Immediate-or-cancel (IOC)

An IOC condition requires the broker to fill as much of the order as possible immediately and then cancel any remaining portion. Note: This condition may only be applied to limit orders and may not be available in all market conditions.

  • Advantage: If you're trying to test the market for interest at a particular price, you should know very quickly if you have a fill. This condition is not as limiting as an AON order.
  • Disadvantage: IOC orders are not entered in the specialist's book and may not be executed at all if your specified price is not reached. You have no control over how much of the order will be filled. This condition can result in a partial fill.

Fill-or-kill (FOK)

A combination of the AON and IOC orders, the FOK order is canceled if it cannot be executed immediately and in full.

  • Advantage: As with IOC orders, this condition allows you to test the market at a specific time and price.
  • Disadvantage: Because you're instructing immediate fulfillment or cancelation of the entire order, you're further limiting the chance that your order will be executed at all.

Minimum orders

A minimum order directs the specialist to buy or sell a specified number of shares at a limit order price with the condition that the first fill must consist of a minimum number of shares. For example, you might place a limit order to buy 5,000 shares at $100 with a minimum fill of 1,000 shares for the first trade. Subsequent trades can be for any quantity unless you specify that shares be bought in certain round lots.

  • Advantage: If you're trading a low-price stock, you can ensure that you get enough of a fill to justify the commission.
  • Disadvantage: A minimum order has no standing in the specialist's limit order book. Consequently, execution may be delayed and may not occur at all if the stock doesn't reach your specified price.

What’s next

Placing conditions on your orders may give you greater control over the outcome of your trade, particularly if you are seeking a minimum fill to justify a commission. However, when you place a condition on an order, you may actually delay order processing and possibly prevent execution of your trade. In addition, placing conditions on limit orders makes your order ineligible for display in the specialist's or market maker's quote.


Nonetheless, a solid understanding of order conditions can help you make decisions that better fit your trading objectives.

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The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

There is no guarantee that execution of a stop order will be at or near the stop price.

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