A FOK order is a type of limit order that instructs an online broker to purchase or sell securities as soon as they dip below or rise above a specified price. The abbreviation stands for “fill or kills” because the system enforces immediacy by refusing to send the order to market unless it can be executed immediately in its entirety. Investors use this order to minimise risk, ensure accuracy and preserve capital.
What does it mean to fill-or-kill?
A FOK order requires that each part of an order be filled immediately at the same time. Unlike other types of orders, there are no partial fills allowed. If any portion of a stock trade fails to execute, then the entire order will be rejected.
FOK orders are often linked to stop-loss orders, which automatically close out an open position if it falls below a specific price threshold. For example, if you own shares of XYZ but want to limit your downside risk to 10% if they fall below $10, you can set a sell stop loss at $9.50. If XYZ hits that price, then the entire order executes immediately as fill-or-kill at the next available ask or bid price for all of your shares. If the order cannot be filled at that time for any reason – perhaps because no matching offers were found – then it is cancelled outright without bothering with any partial fills.
How do they work?
FOK orders are placed on the same level as regular limit orders. You specify the maximum or minimum price you’re willing to pay or sell for, and the order is only executed if it can be filled at that price or better. For example, let’s say you want to buy 1,000 shares of Microsoft but don’t want to pay more than $37 per share. You would enter a limit order to buy at $37 with the “FOK” box checked. That means your broker will only execute the trade if it can fill the entire order at $37 or better.
Why are they necessary?
Limit orders are designed to protect investors against “fat finger” errors on the market. They allow you to set a limit on what you’re willing to pay, so your trade executes only once the market reaches your price or lower. For example, let’s say XYZ stock is trading at $20 per share, and you want to buy it no matter how high the cost gets because you have information that makes you confident it will increase in value over the short term.
You can place a limit order for this with whatever maximum price you’re comfortable paying – perhaps $21per share – and the broker will take your order to market when it matches an offer to buy at that price or lower. If you don’t specify a limit order, the broker has much more leeway in taking your trade to market.
What are FOK orders used for?
FOK orders are used by technical traders who base their decisions on price alone rather than other factors like company earnings or changes in management. These investors are known as “day traders” because they sell assets within 24 hours of purchase once they rise above the original entry point to avoid fees connected with withholding positions overnight. Active traders also use FOK orders to set up stop-loss orders, closing out options if they fall below a specific price threshold.
Bottom line
However, day trading and short-term leveraged investing can be precarious business for individual investors. You should only attempt these strategies with large amounts of funds you’re not afraid to lose because these kinds of investments always carry substantial risk. That’s why it’s essential to understand the full range of available investment tools at your disposal before taking the plunge into high-risk trades like this one. Many investors find that low-cost index funds give them similar returns over time without the added volatility of attempting to predict market movements using technical analysis alone.
Now that you understand how FOK order works, you can buy stocks in Germany on the Saxo website.