Why does the Order Validity matter when selling shares?

Question

In India, with ICICI Direct (An online trading platform), it is possible to specify the "Order Validity" as DAY (Intraday), IOC (Immediate or Cancel) which is being able to sell the shares when I want.

I'd like to understand why I should be concerned with this when I'm selling my shares ? As a seller, all I'm interested in is selling my shares at the market price or a certain price that I've set (i.e. my Limit Price)

I'm struggling to understand why the Order Validity is important to me when selling shares ?

Answer 1

A Day order will be canceled at the end of the day if not executed.

An IOC will be canceled if not filled imediately. So if you place a market order and it is not executed imediately or only partially executed imediately, then the order or partial order remaining will be canceled imediately.

You should also have the choice of placing an order until canceled. This type of order will remain in the order book until it gets executed or you physically cancel it yourself, or sometimes it may get canceled by your broker when the company is going exdividend or for other similar company events.

You can use the different validities to choose if you want your order to be canceled automatically at certain times, so that you don't have to be in front of the screen all day when your buying or selling criteria are not met.

Answer 2

The order validity defines when your order gets discarded if it is not yet executed. Why would it not yet be executed?

1. There could have been nobody willing to trade (that happens with small volume stuff)

2. The limit price was not yet reached

For example, let's assume, you giving a sell order for your Apple shares, with a limit price of 5000. As 5000 is not reached anytime soon, the order gets discarded after 1 day/end of month/whatever Validity you give. Another example: You want to sell your 100 shares of 'Antarctic Gold Mines, Inc' for any price (=no limit). Nobody wants to buy them so the order sits around, until it gets canceled after the Validity chosen.

The Validity must be given, as the traders don't want an order sit in their books for the next 1000 years. Typically, the maximum you can chose is end of month, then all pending orders get cleared/discarded, but that might be different for different traders.

For a high volume shares offered without a limit, it typically doesn't matter, as there is always someone trading, so it goes through within seconds.

Answer 3

For the trading style that you describe, you probably want good-'til-canceled (GTC), which will eventually expire but can stay open for a long time until your order hits. The other validity options are appropriate to different goals and styles. For example, some people may want to update their limit price each night and prefer to have anything not executed expire. Some people are trying to take advantage of very short term price movements and will completely abandon some trade if it doesn't happen immediately.

To the extent that your question was about selling rather than buying, I wonder if that's also part of what confuses you? Keep in mind that (a) the issues above might apply to exiting a position, and (b) some people will be selling short, which means that they are opening their position by selling.