Working order definition

What is a working order?

A working order is a general term for either a stop or limit order to open. Working orders are used to advise your broker to execute a trade when an underlying asset reaches a specific price. This means that your broker knows beforehand how you’d like to trade, so they can make faster decisions.

Working orders are one of several varieties of orders. But, unlike most types of order, working orders are not differentiated by their expiry date. Instead, they can have any length of expiry attached to them, from the same day to good-‘til-cancelled.

Examples of a working order in trading

When placing a working order, you’re choosing a future price at which to buy or sell an asset. Stop orders will execute at a level less favourable than the current market price, while limit orders will execute at a level more favourable than the current market price.

In other words, you don’t open the trade at the current price of an asset, but rather place an order to open the trade at the price that you are willing to pay. Only once – or if – that price is reached, will your trade be opened.

Say you want to go long on Coca-Cola shares. The current share price is $44 but you expect that the market price is going to dip and you want to buy at a more advantageous price, before it starts rising again. You decide to attach a working order that will open your trade if the share price reaches $43. If the market does fall to this price, your order would be executed, but if the market didn’t reach this price, the working order would not be executed.

Pros and cons of a working order

Pros of a working order

With a working order, you can choose the minimum and maximum you are prepared to pay for a trade. When this price is reached, your broker will make the trade.

Working orders can be a good way to manage your risk preferences, and make sure that your positions are aligned with your goals and trading plan.

Cons of a working order

A drawback of using a working order is that if the market price doesn’t reach the level you’ve selected, your order wouldn’t be filled, and you would never enter the market.