Among the most valuable traits that investors should understand and appreciate, when it comes to trading futures contracts, are the various orders. These orders, as its name suggests, are instructions to the brokers that they automatically execute upon meeting the premises. There are premises that the investor will determine in order to signal if it is already the right time for the broker to execute a certain order.
In this regard, there are, in fact, various kinds of orders that traders can employ. The appropriateness of these depends on the situation or condition of the market, as well as other economic circumstances. Among the most common forms of these orders include the good until cancelled, one cancels other, as well as the fill or kill and even the discretionary orders.
Good Until Cancelled
Good til cancelled or GTC orders instruct the broker to retain or maintain a position beyond a single trading day. The broker will only exit the position when the trader explicitly cancels it. This is unlike the day order, wherein the positions automatically cancel upon the closure of the trading day. Hence, this enables traders to hold their futures contracts for a longer period instead of closing it at the end of the day with the prevailing rate. This limits the earnings that the investors could possibly earn.
One Cancels Other
Secondly, on the other hand, the "one cancels other" order is another instruction that is conditional. This instructs the broker to buy one or the other, but not both of them. There will be a certain price point at which the broker will buy or sell the contracts. Upon the execution of the first transaction, the broker then needs to cancel the order for the other. This is like favoring the position to the one that is favorable for the trader.
Fill or Kill
Thirdly, this third order in futures contracts is another conditional instruction. Its only difference from the previous one is that the broker will not base this on two (2) futures. Instead, this will be on a binary decision instructing the broker whether to process to the investment or not. Of course, there will be some criteria that the market performance needs to meet in order for the trader to send the green light to the broker.
Discretionary Orders
Fourthly and lastly, discretionary order, as its name suggests, make the trader give the discretion to the broker, whether to enter or exit a position or otherwise. This is, of course, within a certain bracket of price only. The price bracket is one of the safety nets of the trader in order to limit the movements of the broker to the allowable range that the former can tolerate. Nevertheless, this still has some risks too.
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