Immediate or Cancel (IOC) orders are a specific type of trading instruction that require immediate execution of all or part of an order, with any portion that cannot be filled instantly being canceled. This order type is commonly used by traders who want to enter or exit positions quickly without waiting for the entire order to be filled, often to avoid adverse market movements or to capitalize on short-lived opportunities.

When you place an IOC order, the broker or trading platform attempts to execute the order immediately upon receipt. If the full order quantity is not available at the desired price or within the market’s current liquidity, the portion of the order that cannot be filled is canceled rather than queued or left pending. This contrasts with other order types, such as “Fill or Kill” (FOK), which require the entire order to be executed immediately or canceled entirely, or “Good Till Cancelled” (GTC) orders, which remain active until filled or canceled by the trader.

Formula-wise, you can think of it as:

Order Quantity = Executed Quantity + Canceled Quantity (if any)

Where Executed Quantity occurs immediately, and Canceled Quantity is the unfilled remainder.

For example, suppose a trader wants to buy 1,000 shares of a stock at $50 using an IOC order. If only 600 shares are available at $50 at that moment, the order will execute 600 shares immediately, and the remaining 400 shares will be canceled automatically. The trader ends up with a partial fill but no lingering unfilled order that might execute later at an unfavorable price.

A real-life scenario could be a forex trader looking to buy EUR/USD at a specific price during a volatile market event. They might place an IOC order for 100,000 units at 1.1000. If only 70,000 units are available at 1.1000 at that instant, the broker executes those 70,000 units, and the remaining 30,000 units are canceled instantly. This allows the trader to avoid slippage from the remaining portion being filled at a worse price later.

One common misconception about IOC orders is that they guarantee full execution immediately; in reality, they only guarantee that any execution happens immediately if possible, but partial fills are common. Traders sometimes confuse IOC with FOK, but FOK requires full execution or none at all, whereas IOC allows partial fills and cancels the rest.

Another point to note is that IOC orders can be particularly useful in markets with high liquidity or when trading large quantities that might not be available all at once. They help minimize exposure to price changes that might occur if the order were left open.

Related queries often include: “What is the difference between IOC and FOK orders?”, “When should I use an IOC order?”, and “How does IOC affect slippage?” Understanding these can help traders choose the right order type based on their trading strategy and risk tolerance.

In summary, Immediate or Cancel orders are a useful tool for traders seeking quick execution without the risk of unfilled orders lingering in the market. By allowing partial fills and canceling the rest, IOC orders provide flexibility and speed, especially in fast-moving markets. However, traders should be aware that they may not get the full quantity and should plan their trades accordingly.