How using Order Types benefits your trading

In addition to 'at best' orders available during market hours, automated orders allow you to take control of your trading without having to monitor the markets all the time. They are free and easy to set up, but it is important you understand how each different type works.

Limit order

A limit order lets you set a price above which you will not buy, and below which you will not sell, investments.

So if XYZ plc's shares are currently trading at 752p to buy, but you are only prepared to pay a maximum of 745p, you could set a limit order to buy at a maximum of 745p. The order would then be dealt if the buy price of XYZ plc's shares moved down to 745p or lower. Your order can be for a specific number of shares or an amount of money. We will work out how many shares depending on the limit price you set and take into account the charges and stamp duty (where applicable).

You can set a Limit Order to expire the end of the following trading day or at a range in the future. If the limit conditions are not met before this date the limit will expire and you will need to set a further one if required.

Stop loss

A stop loss order lets you set a price to sell shares (which is lower than the current price) to protect you from sharp falls in a share price.

Experienced investors would usually set a target for the profit they want to achieve and also for the loss that they are prepared to make - a stop loss lets you control the latter. Please note, in some circumstances a share price may fall suddenly, for example when a share goes ex-dividend. This could mean that we execute a stop loss order for you that would not otherwise have been dealt. We will execute the deal in line with your original instruction, which may be at a lower price than specified by your stop loss.

For example, XYZ plc shares close at 700p on Monday night. On Tuesday, the ex-dividend date, the price opens at 670p. You have set a stop loss at 690p so we would execute your order at 670p.

To protect you from fast moving price fluctuations you may wish to set a lower limit to your stop loss instruction. If the price at the time of trying to place an order to the market based on your upper limit being broken is below your lower limit then your instruction will not execute.

Rising buy order

A rising buy order, also known as a 'stop buy order', is an order to buy shares which have entered at a price above the current offering price. It is triggered when the market price touches or goes through the lower limit set. This type of order is often used by investors looking to gain on the momentum of a share price rise.

For example, XYZ plc shares have been typically trading in the range of 690p - 700p; but you only want to buy if the price moves higher than 705p. You are expecting it to rise above 705p if the forthcoming results are as good as analysts predict. You aren't however prepared to pay more than 730p if the price spikes sharply.

You have set a rising buy order with a lower limit of 705p and an upper limit of 730p. The share price rises through 705p as results are announced and your order is executed in the market at 707p.