Market Order
A market order executes immediately at the best available price. It guarantees execution but not price. During high volatility or at market open, you may receive a price significantly different from what you saw on screen.
When to use: When getting the trade done is more important than the exact price. Safe for large, liquid stocks with tight bid-ask spreads. Risky for low-volume stocks.
Limit Order
A limit order specifies the maximum price you're willing to pay (buy) or minimum price you'll accept (sell). If the price is not reached, the order stays open or expires.
Buy limit: "Buy this stock at no more than $50." The order only fills if the price drops to $50 or below.
Sell limit: "Sell this stock for no less than $60." The order only fills if the price rises to $60 or above.
When to use: For low-liquidity stocks, volatile markets, or when targeting a specific entry/exit price. Most experienced investors prefer limit orders over market orders.
Stop-Loss and Stop-Limit Orders
Stop-loss order: When the stock falls to your stop price, it converts to a market order and sells automatically. Used to limit losses. Example: Bought at $100, set stop-loss at $85 — the stock sells automatically if it reaches $85.
Stop-limit order: When the stop price is hit, a limit order (not market) is entered at your specified limit price. In fast-moving markets, the price can gap through your limit, leaving the order unfilled.
OCO (One Cancels Other): Simultaneously places a take-profit limit and a stop-loss order. When one fills, the other is automatically cancelled.
Key Rules to Know
Tick size: Exchanges specify minimum price increments. For stocks under $10 this is typically $0.01; larger stocks may have larger minimum moves.
Circuit breakers: Most exchanges halt trading temporarily when a stock moves beyond a defined threshold (e.g., ±10%) in a single session to prevent panic-driven crashes.