Specific Investor Scenario

You want to buy shares of SBI at ₹600. The market is moving fast. You place an order, but because you didn’t specify the right type, it gets executed at ₹605. In another scenario, you go to sleep, and by the time you wake up, your stock has crashed by 10% because you didn’t have a safety net.

Quick Answer

There are three primary ways to buy or sell on the exchange: Market, Limit, and Stop-Loss (SL).

Official Fact: According to the NSE Trading System Specifications, orders are matched in the system based on Price-Time Priority, meaning the best price gets priority first, and then the order that arrived earlier.

Regulatory Context

Under SEBI’s Master Circular for Stock Brokers (2023), brokers must clearly distinguish between these order types in their user interfaces. They are also required to provide features like “After Market Orders (AMO)” and “Pre-Open Orders” following specific exchange-mandated timing windows.

The Three Core Order Types

1. Market Order

  • How it works: You tell the exchange “Buy this stock at whatever price is available now.”
  • Benefit: Instant execution.
  • Risk: In volatile markets, you might get a much worse price than what you see on the screen.
  • Best for: Large-cap stocks with high liquidity where you just want to get in or out.

2. Limit Order

  • How it works: You tell the exchange “Buy this stock only if the price is ₹X or lower.”
  • Benefit: You control the price.
  • Risk: If the market never hits your price, the order will never execute.
  • Best for: Most retail trades where you have a specific entry/exit price in mind.

3. Stop-Loss (SL) Order

  • How it works: This is a “pending” instruction. “If the price hits ₹Y, then trigger a sell order to save me from further loss.”
  • Benefit: Protects your capital while you are not looking at the screen.
  • The Trigger Price: This is the “alarm” price that activates the order.

Advanced Order Conditions

  • CNC (Cash n Carry): Used for Delivery Trading.
  • MIS (Margin Intraday Square-off): Used for Intraday Trading.
  • GTT (Good Till Triggered): A feature offered by some brokers (authorized by SEBI guidelines) that keeps your order active for up to a year.

Action Items for Investors

  1. Never Trade without a Stop-Loss: Especially in intraday trading, a Stop-Loss is your only protection against a market crash or circuit limit.
  2. Use Limit Orders for Illiquid Stocks: If a stock has low volume on BSE, a Market Order could “gap” and execute at a terrible price.
  3. Verify Pending Orders: Always check your “Open Orders” tab at the end of the trading day to see if any unexecuted orders need to be cancelled.

Official NSE Trading Guide: nseindia.com/products-services/equity-market-trading-system

Verify current status at nseindia.com or bseindia.com before trading.