What is a 'Day Order'

A day order is an order to buy or sell a security that automatically expires if not executed on the day the order was placed. If it is not filled, it is canceled, and it is not filled if the limit or stop order price was not met during the trading session. It is one of several different order duration types that determines how long the order is in the market before it is canceled.

BREAKING DOWN 'Day Order'

For example, a good 'til canceled (GTC) order remains active until it is manually canceled, while an immediate or cancel (IOC) order fills all or part of an order immediately and cancels the remaining part of the order.

Many trading platforms have day orders (often appearing simply as "day") as the default order duration. Unless the trader specifies a different time frame for the expiration of the order, any order to buy or sell a security is a day order by default. These orders are only good during the current trading day and are automatically canceled at the end of the day if they have not been filled yet. Most trading platforms support a wide variety of duration types, including those that are based on an action (such as Fill-Or-Kill) and a duration that is based on a specified time period — one, three or five minutes.

[ Day traders use many different types of orders when placing trades, but most orders are limit day orders that expire at the end of the trading day. If you would like to learn more about day trading, and different order types that day traders use, check out Investopedia's Become a Day Trader course to get started. ]

Use of Day Orders

Day orders are more commonly used by short-term intraday traders. They are typically used by traders to place an order for a security at a specific price point so the trader doesn't have to monitor it for the rest of the day until it is executed, if it is executed at all. Intraday traders usually monitor and trade multiple securities at one time. Prior to the market open, traders analyze each individual security they trade and normally place orders according to their strategies. The trader takes further action as the individual orders are executed over the course of the trading day. For intraday traders, most strategies dictate that positions are exited at or before the market closing. Thus, all orders that were not executed are cancelled. This happens automatically for day orders.

Pitfalls of Day Orders

For the investors or traders who are not professionals and don’t sit in front of a quote monitor screen all day, placing a day order may create a dilemma. For example, if a day limit order is place at the beginning of the trading day and some unforeseen event takes place that may have unfavorable effects on the price of the security, the order may be executed before the investor or trader becomes aware of the situation. The investor or trader may then be stuck with an undesirable losing position in a security. The professionals who are constantly monitoring markets are quick to react and cancel all orders accordingly.

RELATED TERMS
  1. Limit Order

    An order placed with a brokerage to buy or sell a set number ...
  2. Canceled Order

    A canceled order is a previously submitted order to buy or sell ...
  3. End Of Day Order

    A buy or sell order that specifies a price for the security, ...
  4. Market-With-Protection Order

    A type of market order that is canceled and re-submitted as a ...
  5. Kill

    To cancel a trade or order that has been placed, but not filled. ...
  6. Box-Top Order

    A buy or sell order made at the best market price. If the order ...
Related Articles
  1. Trading

    Understanding Order Execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
  2. Trading

    Which Order to Use? Stop-Loss or Stop-Limit Orders

    While both can provide protection for traders, stop-loss orders guarantee execution, while stop-limit orders guarantee price.
  3. Trading

    How To Place Orders With A Forex Broker

    Learn how to set each type of stop and limit when trading currencies.
RELATED FAQS
  1. How can I use a buy limit order to buy a stock?

    Learn how a buy limit order is used by an investor who wants to buy a stock at a certain price, and understand how limit ... Read Answer >>
  2. The difference between a market order and limit order

    Market orders execute a trade to buy or sell immediately at the best available price. A limit order only trades when the ... Read Answer >>
  3. How do I place a limit order online?

    Learn how a limit order is placed, the types of stocks it is most useful for and the specifications placed with it to suit ... Read Answer >>
  4. What's the difference between a stop and a limit order?

    A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock. With ... Read Answer >>
  5. How long does it take a broker to confirm a trade after it is placed?

    Learn about placing trades with a broker and the amount of time required to received confirmation of different types of orders. Read Answer >>
Hot Definitions
  1. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  2. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  3. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  4. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  5. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  6. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
Trading Center