DEFINITION of working order
The working order is “stop” and “limit” orders altogether, or pending orders. Essentially, they’re instructions for a broker to make a trade when an asset hits a specific price.
WHAT IT IS IN ESSENCE
Working orders are one of several varieties of orders, including market orders that will execute at the best available price that day, or good-’til-canceled orders that remain open indefinitely.
Unlike most types of order, working orders are not differentiated by their expiry date. Working orders can have any length of expiry attached to them, from the same day to good-’til-canceled.
There are two varieties of working order:
Stop orders will execute at a level less favorable than the current market price
Limit orders will execute at a level more favorable than the current market price.
HOW TO USE
Markets behave the same way. For every buyer, there must be a seller.
If the stop or trigger price is reached, the order will always get filled, but not necessarily at the price that the trader intended. Stop orders will trigger if the market trades at or past the stop price.
For a buy order, the stop price must be above the current price, and for a sell order, the stop price must be below the current price. Limit orders may or may not get filled depending on how the market is moving, but if they do get filled it will always be at the chosen price, or better.
A working order is a general term for either a stop or limit order to open. You can use it to advise your broker to execute a trade when an asset reaches a specific price.
With working orders, you are communicating the price you are willing to pay to get into the market. And it can be a way to align a trade with your risk/reward preferences. There is always a chance that your working order will not get filled, but if it does, then you took the trade on your terms.