Types Of Orders | Trading in Milliseconds MFT Strategies and Setup | Quantra Course
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Welcome to this video on types of orders.
Are you familiar with the Harry Potter series? If so, you'll remember that in order to create a defence against the dark arts, you need to know some of the techniques used by the dark wizards. Well, this is a similar situation.
Here we will learn about some order types that can be helpful for HFTs, but we can also use them as a defence against HFTs. We'll be discussing four order types: Immediate or Cancel, Intermarket Sweep Order, Hide and Light Order, and Day ISO. Let's go over each of these order types to gain a better understanding, starting with immediate or cancel orders.
So when we say immediate or cancel order, what can you understand from it? Does it mean the order either gets fully executed immediately or is cancelled entirely? Not quite.
This type of order that is either fully executed or cancelled is actually known as Fill or Kill. Let’s say you want to buy 10000 stocks and you placed an order. Now if the exchange is able to find 10000 sell orders to match your order, the entire order will get executed.
But in case, the exchange is able to find only 5000 sell orders, in that case, the entire order of 10000 will get cancelled. Immediate or Cancel is a little different than this. With IOC, even if your order is filled partially, it will get executed as long as it’s an immediate fill. The rest of it gets cancelled.
Next, we have the Intermarket Sweep Order. Suppose you are buying 10000 stocks, with ISO you will be able to buy these stocks across multiple exchanges, simultaneously. It's like shopping for the same item at different stores to get the best price. The goal is to quickly find all available shares on different exchanges, ensuring the order is filled at the best possible price. By using an ISO, traders can save time, reduce trading costs, and minimise the market impact of their large orders.
The third type of order is the hide and light order, which is designed for HFT firms and is not intended to be a defensive weapon for us. It allows HFT firms to hide their orders from other market participants and only reveal them when it's advantageous. The reason why this order type is used by HFTs is so that they can avoid revealing their trading strategies and reduce the time lag at the time of execution.
The last type of order that again is only useful for HFT is the day ISO order. This is a modification of the ISO order. The day ISO order is only valid for the current trading day, just like a day order.
Out of the four order types that we have learnt, the first two order types are the ones that we can use as a defence against HFTs and the other two are only applicable if you are an HFT yourself. Still, it's important to be aware of them and understand how they work to make informed trading decisions.
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