Trade orders are instructions that traders give to the brokers and exchanges which arrange their trades. the instructions explain how they want their trades to be arranged. an order always specifies which instrument(s) [such as stocks, bonds etc.] to trade, how much to trade, and whether to buy or sell. An order may also include conditions that a trade must satisfy. a sophisticated trade order could be like this: Mr. Parekh wants to sell his 2,100 shares of Tata Motors (TATAMOTORS) at no less than 1,207.80 per share, but only if he can trade during the current trading session and only if he can trade the entire quantity at once. he would issue an “all-or-nothing, day order to sell 2,100 shares of TATAMOTORS, limit 1,207.80″.
For many small investors, it is not economical to continuously monitor the market. These investors use orders to represent their interests when they are not paying close attention to the market. Institutional investors who usually arrange their own trades have an advantage over individual/small investors who use orders to express their intentions/beliefs/sentiments about the market. The former can respond to market conditions as they change. The later, therefore, must anticipate such changes and, to deal with them, write contingencies while placing their trade orders/making trading decisions.
Trade orders adequately represent investors’ sentiments in general even when market conditions change. When trade orders fail to do so, institutional investors cancel their trade orders and submit new instructions promptly, but individual/small investors are not so active in responding to such situations. It is, therefore, unlike individual investors, institutional investors are able to take advantage of the changing market conditions. Individual investors therefore must carefully specify their intentions/sentiments when they use orders to trade or make trading decisions.