Quick definition An order that remains inactive until a specified condition is satisfied, at which point the order becomes active and enters the market. What it is A conditional order has a trigger condition that must be satisfied before the order is submitted. Common conditions include a price level being reached, a time threshold being crossed, or another order being filled. Once the condition is satisfied, the order is automatically submitted to the exchange. Why it matters Conditional orders allow traders to execute complex trading strategies without manual intervention. A trader can set a condition that says "if the price of stock A rises above 100, then submit a sell order for 5,000 shares." When the condition is met, the order is automatically placed. Types of conditions The most common condition is a price level (a stop order is a type of conditional order). Other conditions include: - Time-based: the order becomes active at a specified time - Volume-based: the order becomes active if a certain volume is traded - Relationship-based: the order becomes active if another order is filled - Index-based: the order becomes active if a related index reaches a level Practical example A trader holds shares of stock A and stock B. The trader wants to sell all shares of stock B if stock A drops more than five percent. The trader can set a conditional order: if stock A falls to 95 (from a current price of 100), then sell all shares of stock B. When stock A reaches 95, the condition triggers and a market order to sell stock B is automatically submitted. Broker support Most brokers support basic conditional orders like stop orders. Some brokers support more advanced conditional orders with complex logic, often called "smart orders" or "one triggers other" (OTO) orders. Execution limitations Conditional orders are executed by the broker's system, not by the exchange itself. If the condition is triggered and the order is submitted but the market moves before execution, the order might fill at a different price than expected. See also - Stop order - Stop-limit order - One-cancels-other (OCO)
