In stock trading, AON vs FOK orders

There are two types of orders in stock trading: AON and FOK. This article will discuss the differences between these two orders and when it is appropriate to use each type. We will also provide some tips for traders looking to improve their stock trading skills.

What is an AON order in stock trading, and how does it work?

An AON order is an order that is good until the trader cancels it. This type of order does not have a time limit and will remain open until the trader cancels it or the trade is executed. An AON order can be placed during regular trading hours and after-hours trading.

The trader must first decide how many shares they would like to buy or sell to place an AON order. Once the number of shares has been decided, the trader will enter the order into their trading platform. The order will remain open until the trader cancels it or the trade is executed.

What is a FOK order in stock trading, and how does it work?

A FOK (fill or kill) order is an order that must be filled immediately, or it will be cancelled. This type of order has a time limit and must be executed within a certain period, typically within seconds or minutes. The order will be cancelled if the trade is not executed within the time frame.

The trader can input the order into their trading platform with a time limit. For example, they may set an order to buy 100 shares of XYZ stock with a 5-minute time limit. The order will be cancelled if the trade is not executed within 5 minutes. The trader can contact their broker and place the order over the phone. The broker will then execute the order within the time frame that the trader has specified.

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When to use an AON order

There are two main situations when it is appropriate to use an AON order:

The trader is patient and is not concerned about getting their trade executed immediately. For example, a trader may place an AON buy order for 100 shares of XYZ stock with a limit price of $10 per share, and the order will remain open until the stock reaches $10 per share or the trader cancels the order.

The trader wants to ensure their trade is not cancelled due to market conditions. If a stock is trading at $9 per share and the trader places a FOK buy order for 100 shares with a limit price of $10 per share, the order may be cancelled if the stock price falls to $8.99 per share before the order is filled. However, if the trader places an AON buy order for 100 shares with the same limit price, the order will not be cancelled, and the trader will get their trade executed when the stock price reaches $10 per share.

When to use a FOK order

There are two main situations when it is appropriate to use a FOK order:

The trader wants to ensure that their trade is executed immediately. For example, a trader may place a FOK sell order for 100 shares of XYZ stock with a 5-minute time limit, and the order will be cancelled if it is not filled within 5 minutes.

The trader wants to avoid having their order cancelled due to market conditions. For example, if a stock is trading at $9 per share and the trader places a FOK buy order for 100 shares with a limit price of $10 per share, the order will not be cancelled if the stock price falls to $8.99 per share before the order is filled. However, if the trader places an AON buy order for 100 shares with the same limit price, the order may be cancelled if the stock price falls to $8.99 per share before it is filled.

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The benefits of using each type of order

There are several benefits of using AON and FOK orders:

AON orders provide flexibility to the trader as they can be placed at any time and remain open until the trade is executed or the order is cancelled.

FOK orders ensure that the trade is executed immediately, which can be crucial in fast-moving markets.

AON orders may help avoid having trades cancelled due to market conditions, while FOK orders may help avoid delays due to market conditions.

Each type of order has its benefits and drawbacks, so traders need to understand when each type of order should be used. In general, AON orders are best for traders who are patient and not concerned about getting their trade executed immediately. In contrast, FOK orders are best for traders who want to ensure that their trade is executed immediately.