How to Buy Stocks in India? 5 Main Market Order Types

In this Blog post, we’ll be discussing How to Buy Stocks in India? We’ll cover various Market Order types which are commonly used to place Buy/Sell orders in the Stock Market.

Shares/Stocks are purchased and sold by sending an order to the Stock Market through Your Broker. You need to have a DEMAT Account with a Broker like Zerodha to Buy, Sell and hold Shares.

The following Basic information is needed to place a Buy or Sell order in the Stock Market:

Order type – What type of order you want to place to Buy/Sell a Stock
Ticker – Short form of the Name of Company (Example – INFY: Infosys Ltd.)
Quantity – How much Quantity you want to Buy/Sell
Side: Whether you are going to Buy/Sell
Price At which Price you want to place an order

What do you mean by Ticker or Stock Symbol?

Ticker is the Short form of the Name of Company by which it is recognized on a particular stock Exchange (Example – INFY for Infosys Ltd., LT for Larsen & Toubro, etc.)

Read our Blog Post On Best Stock Brokers In India 2021 – Detailed Comparison

You need to have an Active Trading account on a Broker’s App or Website and then Search for the Stock you want to Buy (example Reliance). Then, Click on the Buy Button and a detailed Order Screen will Open.

In this screen, You have to select a suitable Order Type, most of the commonly used order types are explained below:

If you want to carry stocks for more than 1 day (for long term hold) then you need to select Delivery or CNC Option. And, If you want to Buy Stock for same day selling then you need to select Intraday or MIS Option.

Different Market Orders Types

How do You Buy a Share? Market Order Types

There are Different Order Types in the market. Here are a few important types of orders in the Stock Market that you should know:

Market Order
Limit Order
Stop Loss Order
After Market Orders (AMO)
Bracket Orders (BO)

What is a Market Order?

A market order is the most basic type of trade order. It is an order to buy or sell immediately at the Current price. This type of order will always get filled when the stock market is open.

In this order type, we just need to fill the Quantity and price will be automatically filled. Market orders are used when your priority is getting the order filled over getting a particular price.

Example:- A Buy Market Order for 10 shares of company X will purchase 10 shares at the Current Lowest offer price in the order book. A Sell Market Order for 10 shares of company X will sell 10 shares at the order book’s Current Highest Bid price.

Market Order : RELIANCE 100 (Qty.) BUY

What is a Limit Order?

A limit order is an order to buy or sell a stock at a specific price or better. Buy limit order can only be executed at the limit price or lower. Sell limit order can only be executed at the limit price or higher. A limit order is not guaranteed to be executed.

In this order type we need to specify both the Price and Quantity. Example: If a trader places a limit order to Buy shares at Rs. 110, the shares will be bought at Rs. 110 or lower. If the trader places a limit order to Sell shares at Rs. 110, the shares will be sold at Rs. 110 or higher.

Limit Order : RELIANCE 100 BUY @Rs. 1515

What is a Stop Loss Order?

A stop loss order refers to an order to buy or sell a stock when it reaches a specific price limit. This order is placed in advance. It is typically used to exit a position in an unfavourable trade and thus helps in limiting the loss. By placing a stop-loss order, one can save himself from incurring high losses if the price goes against them.

Assume that a trader buys a stock at ₹300 and places a stop loss at ₹280. His/her loss will be limited to ₹20 per share in case the stock starts falling. Professional traders also use a stop loss buy/sell order to enter a fresh position when price crosses a certain limit, referred to as a trigger price.

Example: Suppose after buying the shares at Rs.100 you are now concerned that the price might fall further and do not want to make a huge loss. So you can place a stop loss order at a price lower than your purchase price. Let’s assume you do not want to lose more than Rs.7 on your purchase, a stop loss order can be put in at Rs.93. If the price starts to fall and hits Rs.93 shares will be sold and your loss will be minimised to Rs.7.

What is an AMO or After Market Order?

Aftermarket orders are orders that are placed beyond market hours. The normal market hours are between 9.15 am to 3.30 pm. So these orders are placed when market is closed, such orders are filled in priority on the next trading day.

But, the entire period outside market hours cannot be used to place aftermarket orders. Different brokers specify a time interval, within which we can place the AMOs. There are also conditions on the price of security you can set in limit orders, normally it is in range of 5-10{4b331c42b8926ebe542dc19d70753f982f00baa8493fa3b4ebe6aa56faa6d044} of adjusted closing price but the exact range varies among different brokers. AMOs can also be set at market price.

What is a Bracket Order?

Bracket order is one of the types of trading orders in which 3 orders bundled into one. You can enter a new position with a target and a stop-loss. All bracket orders are limit orders.

In this type of order, The Stop-loss and Target (profit or loss) will have to be set in advance and in absolute points (i.e., 1, 2, 5,10, etc.).

E.g., If the share of XYZ Company is trading at Rs. 300. We can put a Bracket order to buy it at Rs. 300 with a target of 10 points (profits) and stop loss of 5 points. So, When the stock Price is at Rs. 300 stocks will be bought and suppose its price starts moving Up and crosses Rs 310 your Stock will be automatically sold. In this type of order, you need not place a Sell order as if the stock price moves either towards your Stop Loss or Target, your Stocks will be automatically Sold.

Also Check: How to Select Stocks for Investment? Basic Fundamental Analysis

We hope that this article cleared your doubts regarding Different Market Order Types. If You’ve any doubt regarding How to Buy a Stock in India Online, Different Market Order Types, You can comment below. Read our Posts On Share Market Basics. Happy Investing!!