CFD Order Types Explained

When looking at CFD (contracts for difference) brokers, you should be aware of the types of orders you'll need to place in your trading.

When compared to stock or share trading, there are actually more order types available when it comes to CFDs.

Market order

Generally, they are placed during market hours. When you buy, you buy at the ask price, and when you sell, you sell at the bid price.

Limit order

A limit order to sell (at a limit price) refers to an order to sell the stock or CFD if the price trades at or above that limit price.

These orders may be used to enter a position, or to exit a position.

When used to exit a position, they’re also known as a take profit order.

Stop order

A stop order to buy (at a stop price) refers to an order to buy the stock or CFD if the price trades at or above that stop price.

A stop order to sell (at a stop price) refers to an order to sell the stock or CFD if the price trades at or below that stop price.

These orders may be used to enter a position, or to exit a position.

When used to enter a position, they’re also known as a stop entry order, and when used to exit a position, they’re also known as a stop loss order.

If Done (Contingent) Orders

These are orders that are active only after another order is filled, and are otherwise known as "if done" orders.

As an example, if you're placing a limit order to enter a CFD in the evening with a CFD provider that allows orders to be placed when the market is closed, then you may want to place your stop loss order at the same time as well. In this instance, you only want that stop loss order to be active after you have actually enter the position.

So you can place a limit order to enter a CFD (that's pending to be filled), and then youcan place a stop loss order as well, linked to the first order, as an "if done order".

OCO (One Cancels the Other)

These orders mean that if one is done, the other order is cancelled.

For example, if you have a take profit order and a stop loss, and one is done, you will want the other to be cancelled. On many platforms this is implied so you don't have to specifically name it as OCO, eg when you place an order to enter, it may ask for a stop and /or take profit order at the same time.

So have a look at the specific platform and see how to palce these orders.

What you can't easily tell with CFD brokers or providers

The actual way in which CFD providers execute or perform their orders may not be described clearly by all CFD brokers.

For example, one provider may fill a limit buy order if any price trades at that price you stated. However some providers require that the ask (or offer) price trades at that price before a limit buy order is filled. In most situations, you'll probably never notice a difference if there's enough liquidity and trading volume around the prive you wanted to buy at, and you're filled at the price expected.

In some situations however, you may find that the low of the day was the price you wanted to buy at, but didn't get in because of the rule we just described. The price just dipped to that level momentarily as a bid price reached that price, but the ask did'nt.

The only way to know these rules is if you ask in advance, or if you experience a situation like this, to then ask your CFD broker.