You will be able to choose between limit, stop, stop-limit and auction orders for a given trade.
In March 2020 a friend of Marcus had a stop order sitting under his bank shares, set about 10% below the price he paid. One morning the market opened sharply lower, the stop triggered, and his shares sold several percent below the level he'd chosen. A week later the price was back above it. He had bought protection against a gradual fall and got a forced sale at close to the worst moment of the month.
Every order type is a trade-off between getting filled and controlling the price. Investing 101: from zero to your first ETF covers limit and market orders, and Investing in US and global markets from Singapore, lesson 6.2, Market, limit and stop orders, and when each one hurts, explains the basic stop. This lesson goes one level down: what each type does in a fast market, and why auctions are often the quietest place to trade a larger order.
A stop order waits until the price touches a trigger level, then becomes a market order. From that moment it fills at whatever price is available, the same way any market order does.
That's fine when prices move smoothly. It goes wrong in two situations. The first is a gap: the stock closes at one price and opens far lower after news, so the first available price is well below the trigger. The second is a thin book. Take the made-up Larkspur order book from lesson 5.1, Exchanges, market makers and how your order gets filled, with bids of 12,000 shares at S$1.59, 20,000 at S$1.58 and 15,000 at S$1.57. A stop to sell 40,000 shares triggers at S$1.59 and walks down the bids: 12,000 at S$1.59, 20,000 at S$1.58 and 8,000 at S$1.57. The average is about S$1.58, and on a morning when buyers have pulled their bids it could be far lower.
Stops also trigger on noise. A brief dip in a thin stock can touch your level and sell you out of a holding you meant to keep, after which the price recovers without you.
A stop-limit order has two prices: the trigger and a limit. When the trigger is hit, it becomes a limit order rather than a market order. Set a trigger of S$1.50 and a limit of S$1.45, and the order will sell at S$1.45 or better, never below.
The cost is that it may not sell at all. If the stock gaps from S$1.60 to S$1.40, your limit sits above the market and nothing happens. You keep the shares, which is exactly what you were trying to avoid. A stop-limit protects you from a terrible fill, and leaves you holding the risk in the move you most feared.
Neither version fixes the underlying problem. A price-based exit makes the price decide when you sell, and module 11 argues for deciding on evidence instead, in lesson 11.4, Thesis review instead of price stops.
Many exchanges open and close the day with an auction rather than continuous trading. During the auction period orders are collected but not matched. At the end, the exchange finds the single price at which the most shares can trade, and every matched order fills at that one price. SGX runs a pre-open phase before the morning session and a pre-close phase before the end of the day, and the US exchanges run opening and closing auctions too. Check SGX's website for the current phases and timings rather than relying on a schedule here.
The closing auction matters most. Index funds, which you'll meet in lesson 5.4, Index construction and what inclusion does to a stock, value their holdings at the closing price, so they tend to trade at the close to match it. That concentrates a large share of the day's volume into a few minutes.
For you, that has two uses. A larger order placed into the closing auction meets more opposite orders than it would at, say, 11 in the morning, so it moves the price less. And because everyone gets one price, you aren't climbing levels of the book the way a market order does. The risk is that the auction price itself can swing if order flow at the close is lopsided, so send a limit order into the auction, not an at-market one, and set the limit where you'd still be content.
Put it together as a short decision.
For a routine purchase of a busy ETF or a large stock, a limit order at or near the ask during the middle of the session is usually enough. Wait for the opening minutes to pass first. For a larger order in a thin stock such as Larkspur, a limit order placed into the closing auction, or split over several days, usually costs less than one big order during the day. If you want an automatic exit, prefer a stop-limit to a plain stop, knowing it may not fill. Better still, write down the evidence that would make you sell and review it on a schedule. For any order you leave overnight, check whether it's a day order or good till cancelled, and look at your open orders list each time you log in.
Brokers don't offer the same tools on every market. One may support stop-limit orders on US stocks but not on SGX, or allow you to send orders into the SGX closing auction but not the US one. Some only offer stops as a simulated order that sits on the broker's own system and is sent to the exchange when triggered, which changes how fast it reacts. The time to discover this is on a calm afternoon, not on the day you need the order.
Marcus found that his broker allowed limit orders in the SGX pre-close phase but offered stop orders only on US stocks. That one fact changed his plan for adding to Larkspur, which he now places as a limit in the closing auction.
Open your broker's order screen for one SGX stock and one US stock, and list every order type it lets you choose on each.
List the order types your broker offers on SGX and on a US exchange and note one situation where you would use each.
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