Order Types on the Swiss Stock Exchange: An Overview

Before placing an order, you basically decide on two things in advance: the price at which the trade is to be executed, and the validity period of the order. An order is thus, from a technical perspective, an offer to buy or sell a defined amount of a security at either a limited or an unlimited price. Knowing these fundaments allows investors to manage their orders more effectively instead of relying blindly on the standard settings of their individual trading platform. 

An unlimited order, also known as a market order, is the most straightforward and most commonly used order type:  It is an order to buy or sell a security immediately at the best market price currently available. The big advantage lies in the certainty of execution since the order is practically always executed immediately, albeit without the guarantee of selling at a specified price. Particularly in the case of highly volatile or thinly traded securities, the actual execution price can therefore differ significantly from the last displayed price. 

With a limit order, you are able to specify a maximum buy price or a minimum sell price at which the order can be executed. A limit buy order will be executed only at the specified limit price or lower, while a limit sell order will be executed only at the specified limit price or higher. In return, you sacrifice a certain degree of certainty regarding execution: If the price fails to reach your limit, the order remains open or expires unfulfilled.

Stop orders become active only once a predefined stop price is reached, and are generally used to limit losses or secure gains. On the SIX Swiss Exchange there are two key variants: stop loss (market order price) and stop limit (limit order price). As soon as the trigger limit is reached, a stop-loss order is automatically placed in the order book as a market order, while a stop-limit order is entered as a limit order. The difference is critical: stop-loss orders guarantee execution, but not the price, while stop limit orders secure the price, but don’t guarantee that execution will occur.

In addition to the price, it is possible to specify how long the order is valid for, and how it should be executed. Common validity ranges include Good-for-Day (valid for the current trading day), Good-till-Date (valid until a specified date), and Good-till-Cancelled (valid until either execution or deletion). Some banks and financial services providers offer additional execution conditions. These include Fill-or-Kill (FOK), in which the order is either immediately executed in full – or not at all, as well as Immediate-or-Cancel (IOC), where any unexecuted remainder is cancelled immediately. Availability of these additional order conditions may differ depending on the e-banking solution or broker used.

No. For beginners, market orders and limit orders are generally sufficient. Investors who regularly invest over the long term in broadly diversified ETFs or funds generally don’t need to use stop orders or other complex execution conditions. It’s more important to have a solid understanding of one’s own investment strategy and risk tolerance  than it is to understand each individual order type.