What an order is, and why types differ
An order is an instruction given to the exchange through your broker: which share, buy or sell, how many, and on what terms. The exchange’s system keeps all buy orders and sell orders sorted by price; this is the order book. When the highest buying price meets the lowest selling price, a trade happens. If several orders share the same price, the one that came first is matched first.
The two basic types are market orders and limit orders. A market order says “do it now at whatever price is available”, so the trade is almost certain but the price is not. A limit order says “I won’t pay more than this” or “I won’t sell for less than this”, so you control the price, but the trade may not happen.
At the bazar you can tell the seller, “Give me a kilo of hilsa at whatever it costs”: you get the fish, but you don’t know the price in advance. Or you can say, “I won’t pay more than Tk 1,200”: the price is in your hands, but if nobody agrees you go home empty-handed. The first is a market order, the second a limit order. The prices are only an example.
Why it matters to an investor
- To avoid surprise prices: a market order in a thinly traded share can fill well above the last traded price.
- To understand why an order did not fill: if your limit price is far from the market, or outside the price limit (circuit breaker), the order sits unfilled or is rejected.
- To understand partial fills: an order for 1,000 shares may fill only 300, with the rest left waiting. The order type decides what happens to the rest.
- To trade on a plan, not on emotion: setting your price in advance with a limit order reduces the urge to chase a sudden jump.
Other types and validity
Besides market and limit orders, the trading systems on Bangladesh’s exchanges allow some other order types. According to the Chittagong Stock Exchange’s list, these include stop-loss, “fill or kill” and separate orders for large quantities. Your broker’s app may not offer all of them.
- Stop-loss order: becomes active when the price reaches or crosses a set “trigger” price. It is an attempt to limit losses, not a guarantee; if the price falls sharply, the sale can happen below the trigger.
- Fill or kill: executes only if the whole quantity is available at once; otherwise the entire order is cancelled.
- Validity: for the day only (good for day, cancelled at the close if unfilled), until a set date, or until cancelled; under CSE rules the last two can stay for at most one calendar week.
The opening and closing sessions
On the DSE there is a pre-opening session before the main trading, in which orders are collected and the opening price is set at the level where the most orders can be matched. After the main session comes a post-closing session, in which you cannot enter new prices; trades happen only at the day’s closing price. Session times and rules change from time to time.
Worked example
- Say a thinly traded share last traded at Tk 40. The sell side of the order book shows: 200 at Tk 40, 300 at Tk 41, 500 at Tk 43.
- You place a market order for 1,000 shares: 200 × 40 = Tk 8,000; 300 × 41 = Tk 12,300; 500 × 43 = Tk 21,500.
- Total Tk 41,800, an average of Tk 41.80 a share, 4.5% above the last price. With a Tk 40 limit order, only 200 shares would have been bought and the order for the other 800 would have waited.
Result: a market order makes the trade certain but not the price; a limit order makes the price certain but not the trade. Which fits when depends on how actively the share trades and which matters more to you. The numbers are only an example.
Common mistakes
- Assuming a market order will fill at the last traded price you saw.
- Treating a stop-loss as “I can’t lose more than this”. If the price gaps down or there are no buyers, the loss can be bigger than the trigger implies.
- Placing an order and forgetting it. An old limit order still within its validity can fill unexpectedly later.
- Typing the wrong price, quantity or side, and not checking once before sending.
A market order makes the trade certain, not the price; a limit order makes the price certain, not the trade. Decide which matters more before you place it.