Understanding Different Order Types on Zerodha and Their Execution

Order types on Zerodha are instructions you provide to your broker for executing trades Understanding these order types and their execution is crucial for making informed trading decisions and achieving your desired outcomes,

Types of Orders on Zerodha:

• Market Order: A market order instructs your broker to buy or sell a security at the best available price in the market at the time of order placement. This order type prioritizes execution speed over price.
• Limit Order: A limit order instructs your broker to buy or sell a security at a specified price or better. This order type ensures that you will not pay more (for buying) or receive less (for selling) than the specified price. However, there’s no guarantee that the order will be executed if the desired price is not met.
• Stop-Loss Order: A stop-loss order is a protective order that automatically triggers a market order to sell your security if its price falls below a specified level (stop-loss price). This order type helps limit potential losses in a declining market.
• Good-Till-Triggered (GTT) Order: A GTT order is a conditional order that remains valid until it’s triggered by a specified price condition. Once triggered, it converts into a market or limit order depending on the chosen order type.
• After-Market Order (AMO): An AMO order is placed outside regular market hours and is queued for execution at the market opening the next day. This order type allows you to place orders before the market opens, potentially getting a better price.

Execution of Orders on Zerodha:

• Market Orders: Market orders are executed immediately at the best available price in the market.
• Limit Orders: Limit orders are placed on the exchange’s order book and are executed only when the market price reaches the specified limit price or better.
• Stop-Loss Orders: Stop-loss orders are placed on the exchange and become market orders when the market price reaches the stop-loss price.
• GTT Orders: GTT orders are placed on the exchange and remain active until the specified price condition is met. Once triggered, they are executed as market or limit orders depending on the chosen order type.
• AMO Orders: AMO orders are queued and executed at the market opening the next day, based on the best available price at that time.

Additional Considerations:

• Order Book: The order book displays all open buy and sell orders for a security, ranked by price and quantity. This information can help you understand the current supply and demand for the security.
• Trade Book: The trade book displays all completed orders for a security, including the price, quantity, and time of execution. This information can help you track your trading activity and analyze your performance.
• Market Watch: The market watch displays the bid and ask prices for a security, allowing you to monitor real-time market movements.

Choosing the Right Order Type:

The best order type for you depends on your trading goals, risk tolerance, and market conditions.

• Market orders are suitable for situations where you prioritize execution speed over price and are confident in the current market price.
• Limit orders are suitable when you want to ensure a specific price or better and are willing to wait for the order to be filled.
• Stop-loss orders are essential for managing risk and limiting potential losses in volatile markets.
• GTT orders are useful for setting price-based triggers and automating your trading strategies.
• AMO orders are helpful for placing orders outside regular market hours and potentially getting a better price at the market open.

By understanding the different order types available on Zerodha and their execution, you can make informed trading decisions that align with your trading goals and risk tolerance.