What are Market-On-Close (MOC) Orders? Definition, Usage & Examples

Market-On-Close orders or MOC orders are non-limit market orders that enable traders to execute their trade orders either at the closing price or very close to the closing price. In fact, Market-On-Close orders are very useful to order types that prove extremely fruitful.

Do you want to know MOC order definition, usage, and examples? Then you are on the right platform because we are going to share with you all about Market-On-Close orders. Let’s start!

Market-On-Close order or MOC order definition

MOC order can be defined in the simplest terms as an order type that enables traders to execute buy or sell orders as close to the closing price as possible. Traders can enter a trade either exactly at the closing price or very near to closing price. So, it is obvious that Market-On-Close orders are traders’ attempts to catch the latest price of a trading day. However, they are only available on a few specific markets as well as brokers.

MOC orders explained

In simplest words, Market-On-Close orders are trade orders that traders schedule to trade at or very near to the end of a trading day. They do so after anticipating the price movement of stocks or any other asset the next day. Traders intend to enter or exit trades at the most recent market price. This is the purpose of placing MOC orders. 

Market-On-Close orders are not offered by all markets and brokers. Moreover, there are particular time limits to submit these orders. For example, NASDAQ directs traders to submit MOC orders before 3:50 p.m. EST. Whereas, NYSE requires traders to submit MOC orders before 3:45 p.m. EST. Moreover, these orders stay dormant until the end of the day approaches and then become active. Additionally, markets don’t allow cancellation or modification of MOC orders after they become active. 

MOC orders are very similar to other ordinary market orders, especially after they become active. However, there is a slight difference. MOC orders enable traders to enter or exit trades at or near the close instead of placing an order after the close or open of the next trading day. 

Usage of MOC orders

Why do traders use Market-On-Close orders? They use it as a part of their trading strategies. For instance, some traders use MOC orders to enter or exit a trade if the price of a particular instrument breaches a specified price level during that trading day. That means, traders mostly use them as limit order qualifiers even though they are non-limit orders.

Examples of MOC orders

1. Suppose that an XYZ company is about to announce huge profits after the close of the day. The share price hasn’t displayed any signs of upward movement. Thus, traders who are aware of the situation can anticipate the upward price movement of XYZ’sXYZ’s share price. So, they place Market-On-Close orders to buy shares of XYZ at a closing price or very near to the closing price.
2. Now, let’s suppose the opposite scenario to the previous one. Imagine another company that’s about to announce negative earnings after the close. The share price of that company hasn’t shown any indication of adverse movement. However, traders are aware of the situation and can easily predict imminent downward movement. So, they place Market-On-Close orders to avoid losses caused by heavy selloff after the announcement. 

Advantages of MOC orders

Suppose that the intraday price action pattern tells you to place an order at or near the close to get as much near as possible to the closing price. But, you have a full-time job or other responsibilities and don’t have enough time to sit in front of a computer screen when the day closes? What would you do? Market-On-Close orders come into the mix of things here. You can submit a MOC order to catch the closing price while doing your other duties.

Moreover, MOC orders also are extremely helpful in some trading setups. For instance, in trade setups requiring entering or exiting a trade at or near the closing price promises more profit than entering or exiting at the open of the next day.

MOC orders also prove vital in case of time zone differences. For example, you want to trade on a foreign exchange with a different time zone. Similarly, they are useful when you aren’t certain about being in front of your computer screen when the day closes. So, you will use MOC orders to enter or exit a trade at or extremely near to the closing price. 

Disadvantages

Market-On-Close orders may also turn out to be catastrophic because you never know what may happen. Trading is a risky game and literally, no one can be 100% sure about what will happen next. So, if you aren’t there at the closing moments, you can observe what is happening and at what price your MOC order will get filled. For example, share prices of a particular company can move a long way up or down in case of positive or negative news respectively. In such cases, you may find yourself at the wrong end of the spectrum. 

The wrap-up

Market-On-Close orders or MOC orders are useful non-limit orders. They help traders catch the closing price of an instrument at the end of a day. Traders use MOC orders as a part of their trading strategies. For example, traders may use MOC orders if their strategies involve entering or exiting at the closing price. However, they also have a major disadvantage as you don’t know what would happen at the close of a day if you aren’t there. Therefore, it is best to use MOC orders when you are absolutely sure of what you are doing.