What it means
When you place a trade, you must tell the broker how long the instruction should remain in force. An end-of-day order answers that question in the shortest sensible way: today only.
This is the default setting at many brokers, so people often use it without realising it. The attraction is control.
Markets can change quickly, and a price you were happy with in the morning may look very different by tomorrow, so an order that expires on its own removes the risk of an old instruction being filled at a bad moment. It also means you do not need to remember to cancel it.
End-of-day orders are usually combined with a price condition. A limit order says you will buy only at or below a stated price, or sell only at or above one, and when it is set as an end-of-day order it will only be filled if the market reaches that price during the session.
If it does not, nothing happens and the order disappears at the close. Alternatives include good-till-cancelled orders, which stay open for days or weeks until filled or cancelled, and fill-or-kill orders, which must be filled immediately and in full or not at all.
Choosing between them depends on how patient you are and how closely you can watch the market. Finance teams that manage company cash invested in securities often prefer day orders because they keep records simple and avoid surprises.
A nuance is that trading hours differ by exchange, and some brokers allow extended hours trading in which an end-of-day order may or may not remain active. You should check your broker's rules to see exactly when your order expires.
A further point is that an order can be partly filled before the close, in which case the unfilled portion lapses.
In practice
Real-world examples.
Example
An individual investor wants to buy shares in a retail company if the price dips to $25. She places an end-of-day limit order in the morning. The price never reaches $25, so the order expires at the close and she can reconsider the next day.
Example
A fund manager at a small pension fund needs to sell 10,000 shares of a technology company before an announcement the next morning. He places an end-of-day order at a minimum price he finds acceptable. The shares sell during the afternoon and the proceeds are available for the pension payments due this week.
Example
A company treasurer in a manufacturing firm invests spare cash in an exchange traded fund. She uses day orders so that no unfilled order is left open overnight. This keeps the daily cash position report simple and accurate.
Formula
Calculation
Maximum order cost = Number of shares x Limit price
Suppose a treasurer places an end-of-day limit order to buy 500 shares at a limit price of $40. The maximum cost is 500 x 40 = $20,000, excluding any broker fee. During the session the price falls to $40 and 300 shares are filled for 300 x 40 = $12,000. The remaining 200 shares are cancelled at the close, so the company has spent $12,000 and has 200 shares still to buy if it chooses to place a new order.Case study
Seen in the real world.
Kestrel Tools is a fictional manufacturer, and this story is purely illustrative. Its finance manager placed an open-ended order to sell shares the company held as a short-term investment, intending to raise $80,000 for a supplier payment. Because the order stayed open for several weeks, it was filled at a lower price than expected after an unexpected market dip.
After reviewing the loss, the manager changed the company's treasury policy so that all trades must use end-of-day orders unless a senior finance leader approves otherwise. Each morning the team reviews the market and places fresh orders. The result was more work, but the team felt more in control and avoided another unplanned sale.
Watch out
Common mistakes.
- Assuming the order will remain open until it is filled, when an end-of-day order lapses at the close.
- Forgetting to place the order again the next day after it has expired unfilled.
- Not checking whether the broker treats extended hours trading as part of the same day.
Questions
People also ask.
Is an end-of-day order the same as a day order?
Yes, the two names describe the same instruction, which lasts only for the trading session.
Can an end-of-day order be partly filled?
Yes, part of it can be filled during the day, and any unfilled portion is cancelled at the close.
How is it different from a good-till-cancelled order?
A good-till-cancelled order stays active across multiple days until it is filled or cancelled, while an end-of-day order lasts for one session only.
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