An AON order in Australian stocks trading is an order which allows an investor to specify the number of shares they would like to buy or sell, but not what price. It stands for All Or None, meaning that the client must be able to receive all (or none) of the shares they requested at their specified limit price or better.
For instance, if you wanted to buy 100 shares of a company at $8 each but could only get 50 by your desired date, you would receive 50 and pay $8 per share. If, however, before you made the purchase, it dropped below $7.50 per share, you will lose your opportunity to purchase any shares as your order automatically turns into a market order and will only execute once it hits that price point.
When placing an AON order in Australian stocks, the client specifies the number of shares they would like to purchase and a limit price for each share. The broker will fill the order at one or more prices that satisfy the limits of the buy order. If there is no volume available at your limit price, you will not be able to get any shares within the specified range.
However, the broker takes over responsibility for deciding whether to sell at another price than your original limit when they see that volume is available. You can choose between two types of time limits: a day limit that is valid until the end of the market day or a valid GTC order until you cancel it.
You can also use AON orders in Australian stocks to sell shares, but instead of specifying the number of shares you would like to buy, you specify how many shares you would like to sell and at what price point. The order will only be filled when buyers are at that specified price or better. Once again, if no buyer offers that limit or better, your order automatically becomes a market order that executes as soon as possible at the best available price for you.
Why should you use AON orders when trading stocks?
Speculation and Price Target
When trading stocks for speculation, it would be best to use AON orders, i.e., profit from short-term price movements in a particular stock or index. Many benefits come with this strategy, perhaps the most obvious of which is the ability to say what you want (i.e. one hundred shares at $8 each), rather than settling on some random value between your bid and ask prices. It also allows you to sell more shares if the price goes up far enough or buy more if it drops down low enough. It can help eliminate market risk and volatility as it enables level entry and exit points within a trading timeframe, unlike market orders where no such certainty exists.
Implementing Price Targets
The second reason you should use AON orders when trading stocks is to implement price targets. For example, let’s say you like a particular company and want to accumulate it over time but don’t know where the price will go in the short term. If you make an AON order with a limit of $10 per share for 1000 shares, it will be filled regardless of whether the price goes up, down, or stays at $9 because your order will only execute once you can buy all 1000 shares for $10 each.
While this strategy takes longer than placing a market order which will execute instantly, it can help bring consistency to your trades as you continue buying until all your desired shares are bought under the same limit value.
Stops and Price Target
The third reason you should use AON orders when trading stocks is to implement stops. For example, let’s say you like a particular company but don’t want to accumulate it over time until the price reaches your stop-loss point of $8 per share. If you put in an AON order for ten shares at $8 per share, it will continue waiting until the price reaches that level. Once this happens, all ten shares are bought immediately under your limit value ($8).
It allows for lower risk as it executes only once the desired price has been reached, rather than continuing to wait forever if the stock was bought by someone else before that happened without any notification or control on your behalf.
