Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Canceled Order

What it is:

In the finance world, a canceled order is an order that is deleted before it is executed.

How it works (Example):

Let's say Jane Smith calls her broker, John Doe, and tells him to buy 1,000 shares of Company XYZ. John puts the trade in, but Jane quickly calls back and says she meant to say buy 1,000 shares of Company X instead. John quickly cancels the XYZ order before it is executed. (Usually, there is no fee for doing that.)

Why it Matters:

In the real world, canceling orders is almost impossible because trades now execute in fractions of a second -- leaving virtually no time to make that call and change your mind. Sometimes, however, an order will be canceled because it doesn't fit the limitations of the trading system. For example, if John accidentally puts the order in for a billion shares rather than 1,000 shares, the system might cancel the order, assuming it is a typo.

Fill or kill orders are most often used when a person wants to trade a large quantity of stock at a particular price or at a particular time and does not want to trigger the significant price change that often occurs when placing traditional market or limit orders for a large number of shares.