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AON stands for all or none orders, while FOK stands for fill or kill orders. Stock traders use these two types of orders.
You agree to pay whatever price the market dictates when your order reaches the exchange with a market order.
For example, if you own ABC Inc shares and want to sell them immediately, you could place a market order instructing your broker to sell your shares at whatever price they can get.
If the current price of ABC Inc is $1.50 and someone were to place an order to buy it for $2, your shares will be sold straight away even if you receive $1.40 per share.
Of course, the advantage here is that your shares are sold off quickly, but on the other hand, there is no guarantee that you will receive the most favorable price possible.
A limit order allows you to dictate what price you want to pay or receive for something, whereas a market order only instructs the broker in which direction you wish to trade (buy or sell).
Most brokerage firms do not allow traders to specify prices when placing limit orders; however, they still require specific details like the number of shares you wish to purchase or sell, not the price.
A limit order instructs your broker to buy ABC Inc at $1.20 per share; therefore, if someone is willing to sell it for that price, the order you placed in will be carried out immediately.
However, if, on the other hand, the market rate rises to $2 by the time your limit order reaches the trading floor, it won’t be executed (this is because this kind of order is only valid for a certain period).
A stop order allows traders to protect themselves against dramatic losses or lock in possible profits. It does this by triggering an automatic trade when the price reaches a certain point.
A stop order can either be a stop-loss or a stop-gain. A stop-loss order is placed below the market price, and it’s meant to sell the shares (of a stock) when its value falls below a certain level and is considered an “emergency” mechanism.
On the other hand, a stop-gain order instructs your broker to buy back your stocks when it reaches a specific price, thereby automatically locking in profits that you would not have received had you held onto the stock until maturity.
How AON And FOK Orders Work
AON Vs FOK Orders
AON and FOK orders are GTC (Good-Til-Canceled) orders that can be used as limit or market orders. These terms mean that the order is valid only for a certain period and must be canceled if you no longer want to use it.
FOK orders are mainly used by traders who wish to transact in significant volumes of stocks, significantly when their utility prices rise or fall sharply.
A FOK order allows them not to spend too much time monitoring the stock’s price fluctuations they intend to sell off since this kind of order automatically closes itself off once it reaches its limit price.
Generally speaking, FOK orders are best suited for highly liquid securities with sizable daily trading volumes. Their fast execution time is a great advantage in executing large orders.
On the other hand, AON is best for traders who intend to sell limited quantities of shares and wish to determine the exact price they will get from their trades. This kind of order enables you to control the exact prices you want to transact.
It also acts as an essential safeguard mechanism against automatic closing off if your security’s price suddenly spikes up or down, which means it gives you more time so that you can sort out these sudden changes in price before having your order executed.
While FOK and AON orders have similarities, such as being GTC (Good-Til-Canceled) and having limited lifespans, they are different.
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