Order types to aid risk management strategies for stock trading

The world of trading is growing dynamically each day. The global economy is sharply driven by rising trade, and the developments in the ever-growing trade markets have led to serious evaluations and speculations of the trading world. People are getting more and more attracted to trading and choosing it as their career option. This is largely because of the flexibility that trading provides and the growing success stories of popular traders who inspire young audiences vastly across the spectrum. However, trading is not as easy as it sounds to be. If a person chooses trading as their career, then they need to have certain skills and capabilities to handle the everyday complexities of trading dynamics. Interestingly, with the vast appeal and the growing demand for trading as a career opportunity, there have been many educational courses like the espresso online stock market course which are helping to inculcate the basic trading values in young students.

There are many kinds of trading and different people find their interests in the different types of trading. One such most popular one is stock trading. So if you too are interested, then let us delve in deeper, and understand it.

What is stock trading

Buying and selling the shares and securities of publicly listed companies or organizations in exchange for stocks is called stock trading. When an individual buys a stock in any company, he or she becomes a shareholder or an equity owner for instance, of that company. This means that the number of shares that you own in a company represents your ownership of that company itself. 

Stock trading is done for two purposes. Some people or traders buy stocks and keep them with themselves for a long time, with the intention to invest and then earn huge profits at a later stage. While on the other hand, the people or traders who keep speculating about the market and developments, keep buying and selling stocks continuously on short terms, so that they can gain profits from the continuous market fluctuations. 

The stock market has seen tremendous growth over the years, and the number of participants in it has increased substantially. The traders can easily choose various types of orders that are available such as stop loss orders, market orders, limit orders, etc., according to the specific requirements of the market conditions.

However, it is important to remember, that like any other trading or business, stock trading also involves certain risks like market volatility. The prices of the stocks keep fluctuating due to numerous factors such as the company’s conditions, economic indicators, global market impact, and other important aspects. Therefore the trader must do thorough research and proper analysis before investing in any stocks, to prevent or at least manage risk more appropriately. If needed the traders can also improve upon themselves by taking help from trading courses and opportunities like . Overall, stock trading is a valuable option to invest in the trading market, when done with proper knowledge, understanding, skills, and patience.

Order Types For Aiding Risk Management in Stock Trading

Risk Management in trading is essential since it helps traders to limit losses, earn profits, and stay firm while being able to manage their positions well. For this, the order types play an important role, in supporting the various risk management strategies.

The Market Order 

It is kind of a straightforward order that can be executed quickly without any hassle, at the current market price. The traders, when they feel comfortable in any market condition, can use the market order to enter a position promptly. Similarly, when the trader wishes to move out of a position suddenly, the market order allows them to do so.

The Limit Order

With the use of limit order, the traders can use a specific price to set, for which they will be buying or selling a stock. The desired price levels can be met with the use of this limit order. For example, if you want to buy a stock for 100 rs, then you can fix the limit order at 100 rs. The order will only take place when the price reaches or falls below 100 rs.

Stop loss Order

The stop-loss order is a great risk management tool, which enables traders to trade freely without much hassle. Excessive losses can be prevented with the use of a stop loss order since a price is set up below which the stock should not be sold. Over the years, the traders have found the stop loss order helpful, and are using it at a continuous pace, since this makes the trading business notes smooth and prevents risks as well. The risk management strategies are incomplete without the mention of stop loss orders.

Trailing Stop Order

This order also helps in preventing and limiting losses, while accumulating profits. It maintains the limit that has been set by the trader and moves upwards and downwards according to the market and price fluctuations. This order too, is very helpful for the traders since the limit that has been set earlier, remains intact till the end, allowing the traders to choose and decide while making the final call.

OCO (one cancels the other) Order

The OCO orders combine two orders simultaneously, primary order and secondary order. When one order gets executed among the two, the other one gets automatically canceled. 

Good ‘Til Canceled (GTC) Order

The GTC Order remains active till it is executed or manually canceled by the trader. If one is considering setting up long-term entry or exit points in stock trading, then GTC orders are very helpful in managing the risks and uncertainties of stock trading.


Therefore the various types of orders are of great importance in supporting effective risk management techniques in trading. They offer the tools, experience, and opportunities to safeguard their trading investments and prevent or manage their risks wisely. Hence it is important to have a basic knowledge of all these, and a clear understanding of why, when, and how to deploy each of these, to reduce losses and increase the chances of success, in the world of stock trading.