There are various types of orders in the forex market and in other financial markets. One such order is known as a contingency order. A contingency order is one that is regarding the execution of a buy or sell order on the part of the broker and the related trading platform.
There are of course different types of contingency orders out there. One particular example is called an all or none or AON order. In this article, we want to take a closer look at this type of contingency order and see what it means and how it can help you with trading in the forex market.
The Basics of the All or None Order
So as was mentioned at the beginning of this article, an AON or all or none order is actually among the typical orders under the class of contingent orders.
The AON is used to specify the whole size of the order and the fact that it ought to be filled. In addition, as part of the all or none order it is stipulated that partially filling the order is not acceptable at all. So as the name suggests it is all or nothing.
As part of this order, the broker is directed to fill the order wholly and completely or not fill the order at all. As such, for instance, in the case of stock trading or something similar, when you send this order to your broker, if there are not enough assets or shares to fill your order, then your order is automatically canceled as part of the AON order.
So as a trader you know that with the AON order, your order to the broker will either be fully filled or canceled altogether. Precisely because the notion of partial fills is not acceptable under this order.
Of course each type of order has certain specifics. One such specific aspect of the AON order is that it would naturally take longer to be filled by the broker. That is of course if the broker is able to fill the order in the first place. If it is not able to do so, then that is the end of your order.
But if your order is to be filled, then because it cannot be partially filled and the whole of it must be filled at once, then it clearly requires a longer time frame compared to other orders.
Detailed Analysis of the All or None Order
Of course, as it was mentioned, the AON order is among the category of orders of contingency. The reason it is categorized under contingency is that traders are able to provide the directive to their brokers whether or not fill the order completely. This is important, because it means the length of the order or more precisely the length at which it is kept open is contingent upon your order.
As a matter of rather obvious notion, AON orders are almost never filled when they are just submitted. Because of their specific nature, they take much longer than many other orders – as discussed above.
Are AON Orders Good or Bad?
Perhaps we have touched upon a few key words so far in this article that have made you think whether this type of order is actually worth it or not. Given the fact that it takes much longer to be filled, if it can be filled in the first place. Also the fact that partial fills are totally not accepted and also that it can be canceled otherwise. So the risk of your order getting canceled and the time it takes for it to be filled. Why would you use AON? And should you?
Clearly, AON is among the most well-known orders in financial markets. So traders are indeed using them. In order to provide a clearer picture for you of this order, let’s go through its pros and cons.
The Cons of AON Orders
There are three main disadvantages with regard to the all or none order that you need to keep in mind. Knowing these, perhaps this order is not suitable for your situation or the market in which you’re trading.
Number one has to do with the limitations that this order faces in different markets. If the market in question is not liquid enough, meaning that there is not enough liquidity in the market, of course your order would not be filled and it would be canceled.
Number two is what happens in the aftermath of the issue mentioned above. Because of the limitations mentioned, with the AON order you might miss many opportunities in the market to fill your orders and execute your trades.
Number three, and yes we are going to sound like a broken record, but the timing of the AON order is just something you cannot ignore. It does indeed take a long time to fill.
The Pros of AON Orders
But of course there are beneficial peculiarities of the AON order that make it quite suitable for certain markets and certain trading situations. Similarly, we are going to touch upon three pros for the all or none order.
Number one, because it is not possible to fill the order partially, it is a great way for traders to stay away from partial positions. Some partial positions are quite undesirable by traders and put them in a difficult situation. So the notion of no partial fills is actually quite useful.
Number two has to do with the control it gives traders over prices of the trade. When you send an order to be filled, during the time it takes for the order to be filled many things can change in the market.
This is something you will not be faced with the AON order. Because of the all or nothing nature of the order, your order will either be canceled, or the entirety of your order will be filled at your requested price.
Number three is kind of a blessing in disguise. Because of the fact that all or none orders take a long time to execute and that they are not executed instantaneously following their submission, unlike other orders, this gives traders more space to work out their trades and make a better decision.
All or None Order: An Example from Financial Markets
So, let’s see how an AON order actually looks like in the financial market. We already mentioned the use of this order in the stock market. So let the provided example be from the same market.
Imagine you send an AON order to purchase 500 shares of Tesla at 230$. Of course, this means that without partial fills, either your order will be canceled because of the lack of available stocks, or more probably, your order will be filled completely. This means all of your requested stocks of 500 Tesla shares will be bought at your exact requested price.
The name doesn’t lie; it really is all or nothing. But it can be all, think about that.
An AON order or an all or none order is a contingency order that compels the broker to fill the order wholly and in its entirety or cancel it altogether. There are obvious advantages to this mode of execution. There are however drawbacks as well. This is why you should always pick the order carefully.