Trading instructions that are issued by an investor to a broker are known as day orders. The execution of order takes place during the same trading day as issued by the investor. We may configure a day order as a buy order or a sell order. The order becomes null and void in case if the day order is not executed during the same trading session or day.
Mostly every order is considered as day order
In most markets, every order is considered to be a day order unless the investor specify it to be otherwise. Due to this approach it becomes necessary for brokers to execute orders as soon as possible.
Example
For example, if a buy order is submitted by an investor to his or her broker early in the trading day. Usually the broker will execute the order before noon. Doing this the investor is allowed to maximize the benefits from the transaction. The buy order can possibly be processed in a matter of minutes depending on the influx of orders from different clients.
Both investors and brokers get benefits
When each received order is treated as a day order then the benefits are realized by both the investor and the brokerage by which the orders are processed.
Benefits enjoyed by the Investor
The investor treat every order as a day order to get the most benefit possible in a short period of time. As soon as the order to by or sell is processed, the investor begins to reap the benefits of making the transaction.
When the order is executed in a very short span of time, the investor has a chance to observe the active trading for the day and then he can possibly determine if the transaction was indeed the right way to go.
If an order that has been executed by the investor during the morning not seems to be as promising by the afternoon, then usually still there is time to issue another order that will reverse the impact of the earlier transaction on the investor’s portfolio.
Benefits enjoyed by the Broker
Treating each inbound order as a day order is also very beneficial for a broker. There are several brokers by whom fees is applied to each transaction that is conducted on behalf of a client.
The more transactions processed the more revenue is earned by the brokerage on any given day. As a side benefit, investors prefer to work with those brokers who respond quickly to their requests. What it means is that brokers who execute orders quickly are able to work more and more customers and maintain a sizable client base.
Day order can be canceled anytime before actual execution
An investor can cancel a day order at any time prior to the actual execution. However, once a day order has been executed, it cannot be simply voided. The investor will need to provide a new day order to the broker for correcting any set of circumstances that the original order creates. Whatever was accomplished with the issuance of the previous day order will be undo by the new day order.
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Posted by R. MAK. in Stock Trading · 0 Comment
