Time-of-Day Order

What Is a Time-of-Day Order?

The term time-of-day order alludes to a type of trade that permits a investor to request a specific time of day to have an order filled. Time-of-day orders can be executed for either buy or sell requests for stocks or other types of financial instruments. Timing is vital with regards to buying and selling stocks, including the time of day, so it's vital that investors understand when to execute their orders. Time-of-day orders can assist traders who with wanting to buy or sell assets in view of information they accept will influence prices at certain times.

How Time-of-Day Orders Work

A time-of-day order is a sort of order type or a request to buy or sell a stock, bond, or another financial instrument. This type of order is one that accompanies specific instructions with respect to the time period during the trading day when the investor wants it to be executed. This is an especially valuable strategy for day traders and other investors who want to time their entry or exit into a stock or other financial instrument.

Time-of-day orders are strategies that often appeal to investors who trade on certain information that might be revealed at a specific time. For instance, let's say you expect a government announcement is on the horizon stating that the economy shrank in the previous quarter. You might place a time-of-day order to buy Treasury bills (T-bills) in the event that you accept that investors will react to the terrible news by escaping to the safety of government bonds.

The types of orders that exchanges offer investors are important, yet average investors don't necessarily understand the implications of certain market structures. For instance, the advent of high-frequency trading brought attention to different order types (like conceal not slide) that were made available to algorithmic traders.

Whether or not a trader can make a time-of-day order relies upon the rules of the specific exchange or market in which they trade. All things considered, traders might have the option to make other sorts of order types, for example, limit orders, stop orders, and stop-loss orders.

Critics claim that high frequency trading give high-frequency traders an unfair advantage.

Special Considerations

Time-of-day orders can often be paired with other order types. For instance, it might appear to be legit to pair the time-of-day order with a immediate-or-cancel (IOC) order. An immediate-or-drop order requests that main the part from the order which can be filled will be filled and the rest be canceled. The IOC order is generally executed for large orders. This can protect you assuming that you accept that part of your order will be filled at a higher price later on.

Illustration of Time-of-Day Orders

Here is a hypothetical guide to show how time-of-day orders work. Let's expect that you want to buy Apple (AAPL) stock since you accept that the recently delivered iPhone is more famous than either the company or analysts predict. You accept that when Apple releases its iPhone sales data the next day, the stock will hop significantly in price. Since Apple's announcement is scheduled for tomorrow at 2:00 p.m., you place a time of day order for 1:59 p.m.

As mentioned above, it might be smart to place an IOC order in this case. This is especially true on the off chance that you expect Apple stock to spike after 2:00 p.m. Doing so would prevent you from having a portion of your orders filled at a higher price than you filled before.

Highlights

• A time-of-day order is a type of trade that permits an investor to request a specific time of day to have an order filled.
• These sorts of orders can be executed for either buy or sell requests for stocks or other financial instruments.
• Whether an investor can make a time-of-day order relies upon the rules of the specific exchange or market where they trade.
• Time-of-day orders can often be paired with other order types, for example, an immediate-or-drop order.
• Time-of-day orders can assist investors who with wanting to trade on the specific information they accept will be revealed at a certain time.