What is a Day Order? Meaning & Overview

Many years ago, people trading in the stock market were composed of employees of large corporations, financial firms, brokerages, and well-known trading bodies. With the arrival of online trading and the dynamic release of news, the trading playing field has been levelled, so to speak. Trading apps are easy and convenient to use these days, even for the novice trader or the enthusiastic senior trader. Trading apps are evolving into dynamic trading systems that give you the chance to leverage opportunities anytime and anywhere. Given this modern trading scenario, day trading, or giving a day order, has emerged as a fast-paced method of investing in which traders purchase and sell stocks, and other securities, on the same day.  

The goal of day trading is to make profits due to price shifts in the short term. So, trading is opened on a single day and closed within the same day. Several traders who wish to make profits quickly employ this technique and may place a day order to carry out a trade at a fixed price by the end of the trading day. If you are contemplating day trading, you should understand what a day order means. This blog gives you a comprehensive overview.  

What is a day order?

A day order is a stipulation that a trader or an investor place with their broker about the execution of a trade. You could say that a day order is a kind of directive or instruction stating that the investor’s broker will purchase or sell specific securities, such as stocks, at a particular price before a given trading day ends. If the stock, or any other security or asset, in question reaches the buying or selling price, the broker must carry out the order as per the investor’s prior instruction. In case the security does not achieve the price stipulated by the order before the end of the same trading day, the order stands expired. No additional action has to occur after a day order has expired.  

Day traders are quite familiar with day orders, and broking firms and trading platforms are used to trading in this manner regularly. In fact, placing a day order appears to be so common that it is prone to be a default strategy in trading. As it is a convenient way for day traders to trade and does not require much time and effort, day traders potentially employ this way to trade with the goal of making quick profits.  

Investors engaged in online trading with different trading platforms may often find that the digital interface automatically switches to “day order” mode if any investor takes an action to place an order. Furthermore, if the investor wishes to permit the order to stay valid after the present trading day, then they can potentially change the status of the order and choose a different kind of order to be placed. Investors should note that there are various kinds of day orders and before placing one, they should grasp these so they can make educated investment decisions.  

Different Types of Stock Market Orders 

Investors tend to place orders for the purchase and sale of stocks regularly. Multiple kinds of orders can be placed with brokers, and carried out by brokers, at the behest of the investor. Day orders are merely one among the many orders that an investor can place. Furthermore, day orders can be placed and executed for several asset classes, the most common being stock. What’s more, the orders change based on the duration the order remains on the market till it expires. Also, it is important to note that a day order is relevant for just a single trading day. So, without further ado, let’s get into the types of day orders you can give to make potential returns:  

• Good ‘Til Cancelled Order

Commonly referred to as a GTC order, this order is as its name says - the order that is placed is valid until it is carried out or expires and is cancelled by the broker or the trader. You will find that many brokerages place restrictions on the time length that this kind of order stays relevant.  

• Cancel/Immediate Order 

A cancel or immediate order is also restricted by its timeframe, and with such an order, the timeframe is very short. The order, known as IOC, is required to be executed immediately at the price that is stipulated. In case this does not occur, the order stands cancelled.  

• Market Order 

When it comes to understanding day order meaning, it is imperative to grasp the kind of order that is being placed. A market order is another kind of order that is placed by investors and it emphasises an order to purchase or sell an asset or security at the “best available” price that the market decides. As a market order is always executed on an immediate basis, it is commonly believed to come under the category of “day orders”.  

• Limit Order

As the name of this order may give clues to its meaning, a limit order is based on the price at which a security or asset arrives. Therefore, an investor places a limit order when they believe the asset, like a stock, will achieve a certain price or go above that price (a better price than that stipulated by the day order). Hence, an investor places an order for a given stock “X” to be sold when it reaches ₹100, but if the stock is on an upward trend and is rising, an investor may wait till it reaches, say, ₹150, and then sell it.  

From the above, you may have grasped that if the order is a “buy limit order”, it has to be purchased at the particular limit price or any price lower than the limit price. If it is a “sell order”, it must be sold at a specified price or another stipulated price that is higher than the limit price. Given this, a limit order may not always be carried out. Also, a limit order is commonly placed as a Good ‘Til Cancelled Order, a day order, or an Immediate or Cancel Order.  

Conclusion 

Some key takeaways in understanding the concept of a day order are, first, that these are “limit orders” to purchase or sell assets or securities, and are only good for a single trading day, or a period that is limited. For instance, a day order placed at noon must be filled within the remaining period of the trading day or the close of trading. If the order is not carried out, then it expires or stands cancelled. The cancellation takes place at the end of the trading session if the order is not squared off by then.  

In trading, investors have the choice of employing a variety of durations to trigger orders. However, if the orders are limit orders, they fall within the category of day orders. For new traders, day orders can be a potentially positive way to start with day trading, before they assess their risk potential, financial goals, and trading aims.