What is At-Or-Better
At-or-better orders are executed only at a specific price or above. They are an example of a limit order, which sets a specific price to be met for a trade to be made.
Breaking Down At-Or-Better
At-or-better orders are a type of limit order as opposed to market orders. Market orders are executed more quickly than limit orders and are the best choice when wanting the fastest possible trade with less concern about a specific price when taking a long position in a stock. Market orders cost less than limit orders but do not guarantee a price. Limit orders take longer to execute given their specific price requirements and may not be executed for a long time or ever if the desired price is not available. Because limit orders are more complicated to trade, they carry higher brokerage fees than market orders.
Investors use a variety of order types depending on the particular situation. An investor placing an at-or-better order is looking for a breakout and wants to participate in the next move upwards by having an order already placed to go into effect at that price. Stop orders are commonly used as a way to convert a limit order into a market order. Once a stock price hits the price you determine, the order converts to a market order that will buy at the next available price.
A variant of the stop order is the stop-limit order. For example, an investor can set a stop-limit order with a stop price of $25 and a limit price of $23. In this case, once the price hits the stop price of $25 it becomes a limit order that will not transpire unless the price reaches the $23 share price.
In all the above instances the investor has decided that a particular stock is only of interest at a certain buy or sell price. These limit orders are instrumental in allowing day traders and chartists to set up many simultaneous automated orders all with buy and sell levels in place.
Placing At-or-Better Orders in the Modern Era
Technology transformed how stock orders are placed, taking what was once an area of expertise confined to professional brokers and handing it to the masses via online trading sites. Volumes and volatility have increased with the advent of high-speed trading. With this change in how orders are placed comes the need for lay investors to fully understand the many types of trades they can make, ranging from all-or-none to at-or-better orders. This is why it is a good idea to spend time researching the many order types before placing trades.