The term contingency order refers to trades that are only executed if one or more conditions are satisfied. Contingency orders can include conditions such as the price of a security or the execution of another order.
While brokerage houses are not required to accept contingency orders, there are brokers that offer this service. These offers are typically structured as a good-til-canceled (GTC) or day order that is executed only if certain conditions are met. An investor looking to sell a security at a certain price point, and use those funds to purchase another security, can use a contingency order to execute this strategy.
Stop-loss orders are one type of contingency order, since it’s not a market order until the stock reaches a certain price point. Multi-contingent orders require more than one condition to be satisfied before the order is executed. Contingency orders may involve a specific price point, a change in price, or even trading volume. For example, a market sell order might be executed if a security’s price hits a 52-week high.