Canceled Order: Definition, How It Works, Types

What Is a Canceled Order?

A canceled order is a previously submitted order to buy or sell a security that gets canceled before it executes on an exchange. Investors may cancel standing orders, such as a limit or stop order, for any reason so long as the order has not been filled yet.

Limit and stop orders may stand for hours or days before being filled depending on price movement, so these orders can logically be canceled without difficulty. Market orders are a type of order that is very unlikely to be canceled.

How a Canceled Order Works

Most market orders are executed almost immediately the moment they hit the exchange, provided there is sufficient liquidity and the market is open during normal hours. This makes canceling a market order before execution close to impossible.

Limit orders for purchase that are lower than the bid price, or sell orders above the ask price, can usually be canceled online through a broker's online platform, or if necessary, by calling the broker directly. Good ‘til canceled (GTC) orders, which remain active until purged by the investor or the trade executes, can no longer be directly placed with the Nasdaq and New York Stock Exchange (NYSE). However, most brokerages continue to offer this order type.

Orders can only be canceled on the Nasdaq between 4 a.m. and 8 p.m. EST on normal trading days. For instance, if an investor places a cancellation order on their broker’s trading platform over the weekend, it will be canceled on the exchange at 4 a.m. Monday.

The NYSE allows investors to cancel orders between 6:30 a.m. and 3:58 p.m. EST. Other NYSE markets, such as NYSE American Equities and NYSE Arca Equities, also allow order cancellations in extended trading hours. As a safety check, investors should ensure that a canceled order gets purged from the order book.

Fill or Kill Canceled Order

The fill or kill (FOK) order automatically cancels an order that cannot be filled in its entirety immediately. For example, an investor may only want to buy 1,000 shares of an illiquid stock if they can fill the entire order at a specific price. If the investor uses a FOK order, the order would only execute if it can fully complete. If the order cannot be completed, it would be immediately canceled.

This type of order prevents small portions of stock from getting executed. Investors might also use an immediate or cancel (IOC) order, which cancels any portion of the order that does not get filled immediately. A FOK is essentially an all-or-none (AON) and an IOC order combined.

One-Cancels-the-Other Canceled Order

A one-cancels-the-other (OCO) order consists of two dependent orders; if one order executes the other order is immediately canceled. Traders who play breakouts could use this order type. For example, if a stock was trading in a range between $40 and $60, a trader could place an OCO with a buy order just above the trading range and a sell order slightly below the trading range. If the stock breaks out to the upside, the buy order executes, and the sell order gets canceled.

Conversely, if the price moves below the trading range, a sell order executes, and the buy order is purged. This order type helps reduce risk by ensuring unwanted orders get automatically canceled.