What Is a Market-on-Close (MOC) Order?
Let me explain what a Market-on-Close (MOC) order is: it's a non-limit market order that you place to execute near the end of the trading day, targeting the final price available. You often use these in your trading strategies, but remember they come with specific timing rules on exchanges like the NYSE and Nasdaq. While they make it easy to lock in the closing price, they don't guarantee that price, and you face risks like trade imbalances at the close.
How Market-on-Close (MOC) Orders Work
Here's how an MOC order operates: it's essentially a market order that stays inactive until near the market close, then activates and executes at the latest price. This setup lets you buy or sell at the closing price without needing to be there right when the market shuts down. In your strategies, you might use MOC orders to trade if a price target is met during the day, or even as a qualifier for limit orders that cancel if not filled by close. Just know that this exposes you to any price swings at the end of the day.
Important Note on MOC Orders
Keep this in mind: when you place an MOC order, it ensures your buy or sell happens at the close, but it absolutely does not guarantee the price you'll get.
Pros and Cons of Using Market-on-Close (MOC) Orders
You might choose an MOC order if you expect a stock to move big overnight, say from an earnings report or news, so you can buy or sell before the next day's open. It's also handy if you're not around to trade at close or if you're dealing with foreign exchanges in different time zones. On the downside, you won't know your exact fill price if you're not watching, and sometimes these orders hit snags from heavy trading volume at the end, though that's not common.
Practical Example: Placing a Market-on-Close (MOC) Order
Imagine you own 100 shares of company ABC, and they're set to announce bad earnings after hours. The stock hasn't dropped during the day despite poor past results, so to cut potential losses from an after-hours selloff, you place an MOC order to sell some or all of your shares right at close.
The Bottom Line
In summary, MOC orders let you trade at or just after the market close to grab the day's final price, which is great for strategies around upcoming news, but they come with risks like sudden price changes and imbalances. Make sure you know the rules for your exchange, and always weigh these against your overall trading goals and the current market.
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