In finance, a sell order is a brokerage order from an investor to a broker to sell a quantity of stocks, shares, bonds, or other investment assets. There are a number of different types of sell orders that an investor can use to instruct a stock broker. Some of the important types of sell orders include market sell orders, limit sell orders, stop orders, and trailing stop orders.
A market sell order is usually considered to be the simplest type of sell order an investor can issue. It is an investor order to a stock broker to sell the asset at current market prices, with immediate effect. When a market sell order is placed, the asset is sold at the best market price available at the time, which could potentially be significantly different from the price last quoted.
Limit sell orders are a more protective type of investment order. In this type of order, an investor instructs the broker to sell, but only at a certain specified minimum price. The broker will then only execute the order at the price indicated, or better. In this way, the investor limits the risk involved with the sale.
In some cases, limit orders may be partially fulfilled. For example, an investor might instruct a broker to sell a large number of shares at a specified price or better. Then a situation may arise where the specified price is reached, but buyers are only available for a limited number of shares. In this case, it is possible for the sell order to be partially filled, unless the investor has specified an "all or nothing" option on the order.
Stop orders are sell orders that turn into market sell orders as soon as a certain price, called the activation price, is reached. A stop order must be lower than the current market price. As such, investors often consider stop orders as very important protection devices used to limit the potential loss that the investor is exposed to.
Trailing stop orders are a special type of stop order where the activation price can move up automatically if the stock or share that it is attached to rises in value. A stop sell order must be lower than the current market price, and is specified in either points or as a percentage. An investor can use this type of sell order to ‘lock in’ profits on a rising stock.