In the world of stock trading, there are a variety of order types that can be used to place trades. Two of the most common order types are AON (All or Nothing) and FOK (Fill or Kill). This article will look closely at each order type and how they work. You can try using them here.
AON (All or Nothing) order
When an investor places an AON order when stock trading, they tell the broker that they want to buy or sell the security at a specific price and are willing to wait until the entire order is filled. Investors typically place an AON order when they believe the stock is under/overvalued and expect a significant price move soon.
What are the benefits of AON orders?
The main benefit of AON orders is that the investor does not have to worry about their order being partially filled. With an AON order, either the entire order is filled, or it is not filled at all, which can be helpful for investors who want to avoid getting into a position before they are ready.
What are the drawbacks of AON orders?
The most considerable drawback of using AON orders is that they can take longer to fill. Since the broker will only fill the order if the entire quantity can be bought/sold at the specified price, it may take some time to find willing counterparties. Additionally, there is no guarantee that the stock market will fill an AON order, even if the stock price moves in the desired direction.
FOK (Fill or Kill) order
When an investor places a FOK order, they tell the broker that they want to buy/sell the security at a specific price and need the entire order filled immediately. It is cancelled if the stock market cannot fill the order immediately. FOK orders are typically used in fast-moving markets where every second counts.
What are the benefits of FOK orders?
The main benefit of using a FOK order is that it guarantees that the entire order will be filled immediately or not, which can be helpful for investors who want to avoid partial fills, which can often happen in fast-moving markets.
What are the drawbacks of FOK orders?
The main drawback of using FOK orders is that they can be challenging to fill. Since the stock exchange must fill the order immediately, there needs to be a willing counterparty with the same quantity of security available at the specified price, which can often be challenging to find, especially in fast-moving markets. Additionally, it will likely not be filled if the stock price moves away from the specified price before the stock exchange can fill the order.
Which order type is better?
There is no simple answer as to which order type is better. It depends on each investor’s trading strategy and goals. Some investors might prefer the certainty of an AON order, while others might be more comfortable with a FOK order’s risk/reward profile. Ultimately, it is up to each investor to decide which order type is best for them.
What other types of stock orders do UK traders use?
Other standard stock orders used by UK traders include:
Market order
A market order is buying or selling a security at the best price. Market orders are typically filled immediately.
Limit order
A limit order is a popular stock order to buy or sell a security at a specific price or better. Limit orders are not guaranteed to be filled and may take some time to execute.
Stop order
A stop order is a trading order to buy or sell a security when it reaches a specified price. Stop orders are typically used to limit losses or lock in profits.
The final word
No matter what type of order you use, it’s essential to understand how each one works before placing your trade, which will help ensure that your order is filled in the way you intended and avoid surprises. UK traders have a wide range of order types available, so choose the one that best suits your trading strategy.