The share market is a fast-paced place where hundreds of stakeholders are trading at any given time during market hours. If you are a trader looking to buy or sell multiple securities throughout the day, it can get very confusing to keep track of the stock prices and accordingly purchase or sell. To counter this, you can place an IOC order in the share market, i.e., an Immediate or Cancel order.
What Is IOC in the Share Market?
An IOC is one of the many types of ‘orders’ that an investor or trader can initiate in the share market. The order states that it needs to be executed as soon as it is released into the market. This means that the buying or selling of security needs to happen almost immediately, and if it doesn’t, the order is cancelled, and you no longer have it as a pending order. The order is automatically cancelled and requires no intervention from the investor.
An IOC is a ‘duration’ order which means the investor decides how long the order will remain active in the market. When it comes to an IOC, it is a ‘zero duration’ order since there are only a few seconds of time lapse between the placement of the order and its execution.
You can set an IOC order as a limit or market order. A limit order means that you will sell/buy the security only when it is at a particular price point. A market order means that the trade is executed at the current price point.
For example, let’s say you initiate an IOC market order to buy 100 shares of XYZ company. The order is immediately released into the market. The order is cancelled if not completed. In case of partial fulfilment of only 10 shares being bought, the order for the remaining 90 shares will be cancelled.
When Is an IOC Order Most Useful?
Now that you know the meaning of IOC in the share market, you can understand when to use an IOC order.
The best time to issue an IOC order is when you want to make a large order but not influence the market by being “present” for long. The conditions for partial fulfilment mean that an IOC is flexible and will allow you to get the best you can from the market.
You can quickly issue an IOC from your online trading platform. You can build an IOC order into your programs and trade effectively. When you have multiple securities to trade in but lack the time and effort to monitor each, you can set an IOC order for specific securities.
How Is an IOC Different From a Day Order?
The difference between an IOC order and a day order is simple. A day order expires at the end of the trading day if unfulfilled, while an IOC is cancelled as soon as the unavailability of the security is known.
How To Place IOC Orders in the Stock Market?
Follow these steps to place an IOC order.
- Choose a trading platform: Choose a reputed stock broker to open your Demat and trading accounts. You must do research on their charges, market reputation, and online trading platform before finalising.
- Educate yourself: Gather knowledge about different types of orders and their applications. Understand the factors you should consider before placing an order.
- Select stocks: Choose the stock you want to trade. Before placing an order, review their trading history and price charts.
- Choose order type: On the trading platform, choose “Immediate or Cancel (IOC)” as the order type. It is also labelled as “Fill or Kill (FOK)” on some platforms. While specifying the order type, be sure to:
- Specify buy or sell order
- Enter the quantity
- Set price
- Review order details: Finalise the order and double-check the details before placing the order. Ensure that the stock symbol, quantity, order type (IOC), and price are all correct.
- Confirmation: After submitting the order, you’ll receive a confirmation on the platform confirming that the IOC order has been placed.
- Monitor execution: Check the trading platform to see if the IOC order gets executed. You might need to place a new order or adjust the price to match market conditions if the IOC order is only partially executed.
Features of IOC Order
- Speedy execution: This type of order emphasises speed. These are helpful for traders who are busy or want to buy or sell immediately. When you place an IOC order, you’re signalling to the market that you want to execute the trade as quickly as possible.
- Limit or market order: Traders can place IOC orders either as a limit or market order. IOC market orders allow traders to buy or sell shares at the current market price. Conversely, a limit order allows the trader to set a price to execute the order.
- Precision pricing: Placing an IOC order allows traders to avoid paying more than they intend to when the price rises.
- Risk management: IOC orders can be used as a risk management technique. By setting the price level and quantity, you can control the potential outcome of the trade.
- Market volatility management: During phases of market volatility, IOC orders enable you to swiftly exit a position without extending your exposure. Even if the market moves unexpectedly, your IOC order will ensure that your order is executed at a specific price.
- Flexible quantity: With IOC, you can execute bulk or small orders without any obstruction. It especially helps when you place large orders for low-volume stocks.
- Customise trading strategy: IOC orders can be tailored to fit various trading styles. You can adjust IOC if you are an intraday trader looking for quick in-and-out or an investor who wants to make precise entries and exits.
- Transparency: IOC orders provide transparency regarding the price and quantity of the order. The order will be executed at your specified price or cancelled if market conditions don’t align with your terms.
- Technology-driven: IOC orders let you take advantage of advanced trading technology and algorithms to execute trades swiftly. Using technology ensures that your orders are routed to the best available prices in the market, increasing the likelihood of a favourable execution.
Conclusion
You are now equipped with a basic understanding of an IOC order. With this confidence, you can take the next step of issuing trading orders from your online trading account and building your finances.
FAQs
What is IOC in the share market?
The full form of IOC is Immediate Or Canceled. IOC allows the investors to buy or sell the share when the order is placed in the market. If it fails, the order will be removed from the system. As it is a duration order, it gets cancelled if not executed immediately.
When should an investor use an immediate or cancel an order?
An IOC should be used for the following cases:
- When an investor places several orders but cannot monitor each trade simultaneously.
- IOC helps reduce the risk of forgetting to cancel an order during the trading hour.
- When an investor wants to place an order without controlling the prices.
What is a day order?
In simple words, a day order is an order that expires if not used before the end of the trading day. However, a day order can also be a limited order but will expire when the trading ends in the share market.
When to use an IPC order?
This kind of order is mainly placed by investors when they are going to make a large order. This is mainly done because they do not want to attract the market by being “active” for a long time.
