Futures Order Types Explained

Orders are the core of trading any asset class. As a result, understanding various order types is an important first step in learning to trade futures.

Table of Contents

• All Order Types

• Additional Order Tools

• Important Notes

All Order Types

Market Orders

A Market order is a basic order type that instructs the broker to buy or sell at the best available price. Market orders are considered to be the most immediate way to enter or exit a trade and are often executed instantaneously.

While market orders guarantee execution at the next available price, they do not provide any control over the specific price at which they fill.

Limit Orders

A Limit order is an order type used to buy or sell a futures contract at aspecific price or better. While limit orders do not guarantee a fill, they allow traders to control the price at which they enter or exit a position, helping to prevent negative slippage.

• Buy Limit orders must be placed below the market, while Sell Limit orders must be placed above the market.

Limit orders are the default order type for Profit Target orders, as they give you greater control over the price at which winning positions are closed. This helps ensure that your exits occur at your specified price or better.

Stop Market Orders

A Stop Market order is an order type that becomes a market order once a specified stop price is reached. When the market hits or moves beyond the stop price, the order is triggered and executed at the best available price.

This order type helps traders enter or exit positions when the market moves in a specific direction, but it does not guarantee the exact execution price due to possible slippage.

• Buy Stop Market orders must be placed above the market, while Sell Stop Market orders must be placed below the market.

Stop Market orders are the default order type for Stop Loss orders, as they guarantee you will be taken out of a losing position as quickly as possible once touched by the market.

Stop Limit Orders

A Stop Limit order is similar to a stop market order, but instead of triggering a market order when the stop price is reached, it triggers a limit order.

This gives you more control over the price at which the order may be filled, but it also means the order may not be filled at all if the market moves past your limit price, also known as the offset, so a fill is not guaranteed.

• Buy Stop Limit orders must be placed above the market, while Sell Stop Limit orders must be placed below the market.

Market if Touched (MIT) Orders

A Market-if-Touched (MIT) order is similar to a stop market order in that it triggers a market order once a specified price level is touched. However, unlike a stop market order, an MIT order must be placed on the opposite side of the market:

• MIT buy orders must be placed below the current market price, while MIT sell orders must be placed above the current market price

These orders are not submitted to the exchange immediately. Instead, they remain local to your trading platform and are only visible to you until the specified price is touched. Once the price is reached, the order is then submitted to the exchange as a market order.

This provides the advantage of placing pending orders that are not visible to other traders using Level II market data.

Additional Order Tools

Time In Force: Time-in-Force (TIF), also known as order flags, determine how long a pending order will remain active until it is automatically canceled by the broker if it is not filled or canceled. Please visit this page for more info: Order Flags (Time In Force)

Bracket Orders: Exit strategies often consist of predefined Stop Loss and Profit Target orders to help easily manage your winning and losing trades. Please visit this page to get started: How to Create ATM Strategies (Bracket Orders)?

OCO Orders: OCO stands for "one cancels the other", meaning that once one of the orders in a group is filled, the remaining are canceled. Please visit this page to get started: How to Place One Time OCO Orders?

Important Notes

Commissions: There is no difference in commission rates for the different order types, including Trailing Stops and ATM Strategies. Slippage: Slippage is the difference between the expected price of an order and the price at which it is actually executed. It most commonly occurs with market orders and stop market orders during periods of high volatility or low liquidity, as the best available price can shift between the time an order is placed and when it fills.

Specialized Order Types: The following specialized order types are not supported on KGI Crusoe accounts - iceberg orders, pegged orders, TWAP orders, VWAP orders, discretionary orders, conditional orders, and reserve orders.