AON vs FOK orders in stock trading

We’ll be comparing the different types of market orders, how they work and which can be used in certain conditions.

  • AON (All or None) order: This is an order to buy or sell a stock that must be executed in its entirety or not at all. For example, if you place an AON order to purchase 500 shares of stock at $10 per share, your order will only be filled if 500 or more shares are available at $10 per share. If fewer than 500 shares are offered at $10, the unfilled portion of your order will be cancelled automatically without being executed first.
  • FOK (Fill Or Kill) order: This type of market or limit order instructs your broker to buy or sell a stock immediately, but only if you can fill the entire order at once. If the order can’t be filled immediately, it will be cancelled.

The main differences

The main difference between these types of orders is that an AON order guarantees that your entire order will be filled or none of it will be executed. With a FOK order, if the stock price falls and there are not enough buyers at the new lower price, your order may not get filled at all.

Which type of market order is best for you depends on how much risk you’re willing to take. An AON order gives you more protection against slippage (the difference between the expected price of a security and the price at which it is traded), but it could result in less of your order being filled.

Pros to AON orders?

  1. Can help avoid slippage when the stock price is expected to fall
  2. Guarantees that the entire order will be executed or none will be executed Cons to AON orders: If you want some but not all of your order filled, a FOK order may get you more shares at better prices before it’s cancelled.
  3. Gives the trader a chance of getting a partial fill on an order if there is not enough volume for a full fill. 
  4. More shares can also be bought/sold at better prices if they become available after a partial fill before the order is cancelled.

Cons to AON orders?

AON orders are bad for the market because they restrict the freedom of traders to trade. They also create an information asymmetry where insiders have more information than outsiders. This can lead to inefficient markets and bubbles. AON orders can also cause liquidity problems in the market. Finally, traders may use them to manipulate prices. It is generally agreed that AON orders should be banned or at least limited in use for all these reasons.

The pros of FOK orders?

FOK orders limit your downside risk.

When you place a FOK order, you tell the market that you will only buy or sell a certain number of shares at a specific price. This means that you won’t end up buying or selling more shares than you intended, regardless of how high or low the stock price goes. This can help protect you from losing too much money if the stock price falls.

FOK orders can help you get a better price on your trades.

Since FOK orders only trade when the stock hits the price you indicate, they can help you get a better price on your trade. If the stock is trading at $30 and you place a FOK buy order to purchase 200 shares at $28, then your order will sit there until the price falls to that level. In this case, FOK orders would benefit from getting a better fill price or avoiding an unfavourable limit price.

FOK orders help simplify trades.

Filling multiple buys and sell orders for a single trade can be confusing and time-consuming. By using a FOK order instead of placing separate trades, you save yourself from having to enter multiple instructions into your online brokerage’s system–and from losing track of each one as it gets filled.

Cons to FOK orders:

  1. If a stock price is moving quickly and you don’t get a chance to adjust your order, you may not fill the entire order. 
  2. Since FOK orders can result in partial fills, some traders feel that they expose them to more risk of slippage.

You decide which is right for you! Most traders prefer FOK because it’s less risky than AON and gives them a better shot at getting their desired trades executed at the best prices. If you want to know more about trading strategies or want someone to teach you how to trade stocks successfully, subscribe to receive free updates and tips straight from a trusted source like Saxo.

In Conclusion 

We strongly advise that you consult a certified financial advisor before making any investment decisions based on your unique circumstances.