What is a Day Order?

A day order stays active for only one trading session. If it is not executed before the session ends, the order automatically expires.

• A day order is valid for 1 trading day.
• It can be used for both buy and sell orders.
• A limit day order executes only when the specified price or a better price is available.
• Any unexecuted portion is cancelled at the end of the trading session.
• In the given example, an order to buy 100 shares at ₹140 each will execute only if the required price is available during the day.
• Day orders can help traders place orders in advance without continuously tracking prices.

A day order is one of the different order duration types used to decide how long an order stays active. As the name suggests, it remains valid for one trading session.

If the order is not executed during that trading day, it is automatically cancelled at the end of the session.

GTC and IOC are other duration-based orders used in trading. A GTC, or Good Till Cancelled order, generally remains active until it is executed or cancelled, depending on the order types supported by the trading platform.

An IOC, or Immediate or Cancel order, tries to execute immediately. It may be fully or partially executed, and any portion that cannot be executed immediately is cancelled.

Day orders are commonly available as an order-validity option on trading platforms. If you want a different order duration, you need to select another available validity option.

Day orders can be useful when you want to buy or sell a security during the current trading session at a particular price.

For example, you can place a limit day order at a chosen price. If the market reaches a price at which your order can be matched during the trading session, it may be executed.

If the required price is not available, the order expires at the end of the trading day. This means you do not need to keep monitoring the security just to cancel the order later.

Day orders can also help traders who are tracking multiple securities during the same trading session.

Understanding what a day order is and how it works is important before using one. You should also understand its advantages and limitations.

What are the advantages of day orders?

A day order allows you to place a buy or sell order for the current trading session without continuously monitoring price movements. Once the order is placed, it remains active until it is executed or the trading session ends.

This can be useful when you are tracking several securities at the same time. For example, you can place a limit day order at your preferred price and continue monitoring other trades instead of watching one stock throughout the session.

Another advantage is automatic expiry. If the order is not executed during the day, it is automatically cancelled at the end of the trading session. This reduces the chance of an old order remaining active on a later trading day when market conditions may have changed.

What are the disadvantages of day orders?

The main limitation of a day order is that it may remain unexecuted. If the required price is not available during the trading session, the order expires, and you may need to place a fresh order on the next trading day.

Volatility in the share market can also affect order execution. Prices may change quickly, which can make it harder for an order to be filled at the expected level.

For example, a market order may experience slippage when prices move sharply between the time you place the order and the time it is executed. A limit order gives you more control over the execution price, but it may not be filled if the specified price is unavailable.

Day orders are also limited to a single trading session. If your trading plan depends on a price level that may take several days to reach, you may need to place the order again on the next trading day.

Suppose you want to buy shares of a hypothetical company, ABC. The securities quoted are for example purposes only and not a recommendation.

You place a limit day order to buy 100 shares at ₹140 each.

If the shares are available at ₹140 or lower during that trading session, the order may be executed. However, if the required price is not available before the session ends, the unexecuted order automatically expires.

A day order remains valid only for the trading session in which it is placed. If the order is not executed during that session, it automatically expires.

Day validity can be combined with an appropriate order type depending on how you want the order to be executed. A limit order can help you control the execution price, although it may remain unfilled if the required price is not available.

Institutional investors may also use smart order routing to route orders across available trading venues based on factors such as price, cost, speed, and likelihood of execution.