Conditional orders are very special types of order and they refer to more complex order types that are used in advanced trading strategies. A conditional order is a type of order that encompasses one or more specified criteria.

Breaking down conditional order

Despite the fact that conditional order can be used by all traders, more advanced traders will prefer to the other order types whilst the less advanced traders will opt for basic order types like the limit order, stop order and stop limit order.

Non-conditional orders refer to a defaulted order in which the trader does not give specified demands on the price of a financial instrument or timing of the trade. An example is the market order. It is quite a basic type of order used by novice traders and does not contain any specified criteria on for price or timing. The order is placed at the first available best price option.

Standard conditional orders

The standard conditional order type includes, the limit order, stop order, stop limit order. These standard order types are usually offered to traders by brokerage firms and discount brokers. Almost all trading platforms have the standard conditional orders available to clients account for use.

Advanced Conditional Orders

The advanced conditional order was built based on the concept from the standard conditional orders. It also has an additional criteria which is added to a trade to help an advanced trader to manage broader risks.  Advanced conditional orders are usually offered to traders by advanced trading platforms like Interactive Brokers. Some technical analysis platform such as Metastock, Ninja Traders, Wave59 PRO2, TC2000, Equity Freed workstation, INO MarketClub, ProfitSource, and VectorVest have the advanced conditional orders on their platform.

Advanced conditional orders include several variables such as price, time, volume, margin cushion, percentage change and many more. Different variable combinations can also be used. Operators can also be used by traders to specify certain variables like equal to, greater than or less than.

Specific conditional orders can be incorporated into the advanced conditional order. These include

One-cancels-the-other and order-sends-order. In one-cancels-the-other, many conditional orders can be executed but the orders will be canceled once one has been executed. In the case of order-sends-order, multiple conditional orders can be executed and once one is executed, it will trigger the execution on the rest.

Advanced conditional orders can be used for a number of trading strategies by traders and technical analysts. They can be used to manage risks by portfolio managers as well.

By Ricardo Martinez

Ricardo Martinez has been active in the financial markets for around 10 years. In the early days in his career he was a trader and worked as market analyst in different online brokers advising clients on key decisions of trading instruments in foreign exchange and commodity markets. Ricardo is currently working as independent trader with diversified portfolio over different markets. His writing for LearnMarketonline is part of his commitment to share knowledge with traders.