What Is a Time-Of-Day Order?

A time-of-day order schedules a trade for a specific time during the day and remains good until canceled, unless the trader builds in an expiry time as well. This type of order can be used to precisely control when a trade will occur to take advantage of specific market conditions. Traders must comply with any exchange rules governing the creation of market orders when they write a time-of-day order and the execution must be carefully documented for record keeping purposes.

There are a number of reasons to want to schedule an order for execution. A trader may be away from the floor at a given time, in which case this type of conditional order can be used to maintain a presence and execute trades at the right time. This can be useful if a trader knows about an event that may change stock values, making it advantageous to be prepared with a time-of-day order to take advantage. A company might be making a dividend statement, for example, in which case selling shares could turn a profit for the investor.

Conditional orders can also be used to schedule a trade to make sure it will go through when planned, automating the trading process. Major news events can influence stock prices and traders might want a time-of-day order to be prepared; if there’s a speech from the President planned at a specific time, for instance, it will affect stock values. By planning ahead, traders can be sure that they will be in the best position to profit from the event.

Details of a time-of-day order should discuss the stock involved, the number of shares, and the desired price. In a buy order, the trader indicates the order should be filled with available shares for sale at that price. Sell orders offer the shares at a given price. It may only be possible to partly fill a time-of-day order if the trader’s pricing is not in line with the market conditions. This may necessitate waiting several hours to buy or sell all the shares.

Traders can cancel a time-of-day order to make it invalid if they want to change their market position. Careful procedures need to be followed for cancellations to make sure they are handled and recorded properly. If traders have already entered deals on the basis of that order, it cannot be withdrawn; thus, if someone filled a buy order with the number of shares desired at the offered price, the trader can’t cancel it to get out of the deal.