Cancel Order

Cancel Order is an instruction given by a trader to his broker or the exchange to not carry out an order which has already been placed, before it is executed on the exchange. Cancel order is important in case of limit orders when the price is expected to move outside the current buy-sell range or when the market price later is expected to be more advantageous than limit price for which the order was placed.

Example

Suppose a trader places a limit order to buy 100 shares of a company at $100 per share, which is currently trading at $102. Due to a recent negative earning surprise, the price of the stock begins to fall. As an analyst, you expect the stock price to go below $100. As a result, buying at the market price later might be more advantageous than buying at the limit price. Hence you place a cancel order at the exchange through your broker to stop the purchase of shares at $100.