Order Placement Guide

If you are new to trading we suggest you place orders in PLAIN ENGLISH without using jargon or industry terminology otherwise the dealer may assume that you are a professional trader and execute your orders according to exactly what you say. Correct order placement comes with experience.

How Can I Be Sure I Get the Best Price?

One of the major pluses of futures markets is that they provide equal access to all market participants. This means that irrespective of whether the investor is a large financial institution or a private trader, the investor has equal entitlement to all prices traded. The price that an investor receives when they place a futures order obviously depends upon what type of order was used and the market conditions that prevail at the time.

One of the ways to avoid uncertainty is to use a limit order. This ensures the trader will never buy at a price higher or sell at a price lower, than the price they have specified. While limited orders provide certainty, it needs to be remembered that a broker can only ever trade at the prices available in the market. For this reason, it may be necessary for a trader to revise their limit price either up or down in order to attract a counter-party willing to deal.

If speed is of the highest priority, the most appropriate order is often a “market” order. While using this order will ensure that the volume of contracts sought will be obtained, the investor must be prepared to deal at whatever prices are currently available in the market. Depending upon market liquidity, these may vary considerably.

Listed below are common types of orders used along with the characteristics distinguishing each. At CKL, our Authorised Representatives can advise on the use and placement of these orders.  Please contact us if you have any questions.

Order:  An instruction to Buy/Sell received from the client containing the details:

Client Account Number: personal identification number.

Contract: the specific futures instrument.

Contract Month: the relevant trading month.

Volume: the quantity to be bought or sold.

Price: numeric value associated with instrument.

Long (Buy): Anticipation of a rising market.

Short (Sell): Anticipation of a falling market.

Sessions:  All orders are assumed good for one trading session (e.g. day session, night session) unless otherwise specified.  That is, they lapse if not filled by the end of the trading session.

Type of Order: as detailed below.

Market Order:  This order is to be executed immediately. Implies that price is a secondary consideration

A:  Sell 5 September SPI at market 

e.g. get filled at 3015  (Best price at the time)

            B:  Buy 5 September SPI at market.           

            e.g. get filled at 3015  (Best price at the time)

Limit Order: This order identifies the maximum and minimum price that the client is prepared to buy or sell at.  Limit orders are quite often used for setting profit targets or new order entry settings. Be aware that if you have placed a profit target as a Limit order, it will have to be cancelled if you exit a trade through a separate order.

            A:  Buy 5 Sep SPI at 2950

Order can only be filled up to a maximum price of 2950 or less.  If you have a short position and the market is above 2950 it will only be filled when it reaches 2950 or below.

Note:  If the market is trading below 2950 already it will be executed immediately as a market order.

            B:  Sell 5 Sep SPI at 3100

Order can only be filled above a minimum price of 3100 or more.  If you have a long position and the market is below 3100 it will only be filled when it reaches 3100 or above.

Note:  If the market is trading above 3100 already it will be executed immediately as a market order.

Stop Order (or Stop Loss Order): As soon as the market trades at or above the specified price for Buy orders or at or below the specified price for Sell orders, the order becomes a market order to be executed immediately.  In volatile markets slippage may occur resulting in the actual fill price being different from the specified price. Be aware that if you have placed a Stop Loss order it will have to be cancelled if you exit a trade through a separate order.

Stop loss orders are deployed for two reasons:

1. Managing risk

The primary purpose of a “stop loss” order is to get out of the market should prices move adversely. Though there is no guarantee that you will be able to get out of the market at the exact stop loss level, the use of stops is one way of helping to keep risk confined to target parameters. For this reason, they are widely used and are highly recommended – especially for new traders.

2. Entering the market

As well as managing risk, we frequently use stop losses to enter a market. Ie, a stop-loss buy order means this-if the price trades at or above a specified price, get me in “at market”. This type of order guarantees that you only enter the market if it is showing strength. That is only enter the market if it is going up or “breaks out” above a certain price level.

            A:  Buy 5 Sep SPI at 3050 On Stop

If the price is less than 3050 it will not be executed or 'filled' until the price trades at or above 3050.  Hence it works effectively if you are short the market and the price rises against your position.

Note:  If the market is trading above 3050 already it will be executed immediately as a market order.

            B:  Sell 5 Sep SPI at 3000 On Stop

If the price is above 3000 it will not be executed or 'filled' until the price trades at or below 3000.  Hence it works effectively if you are long the market and the price falls against your position.

Note:  If the market is trading below 3000 already it will be executed immediately as a market order.

OCO (One Cancels the Other):