Market order
According to investor.gov, a market order is an order to buy or sell a security immediately. It guarantees that the order will be executed, but not the execution price. It will usually execute at or near the current bid (for a sale) or ask (for a purchase). Investor.gov reminds readers that the last traded price is not necessarily the price at which the order will execute. FINRA adds that this is the most common order type, and that in a fast-moving market you may get a different price from the one you saw on screen.
Limit order
A limit order is an order to buy or sell at a specific price or better. According to investor.gov, a buy limit executes only at the limit price or lower, and a sell limit only at the limit price or higher. The example there is simple: an investor who wants to pay no more than 10 dollars for a share submits a limit order, and it executes only if the price is 10 dollars or lower. That price control is the benefit, and also the trade-off: FINRA notes that the order may not execute at all if the market never reaches your price.
Stop order (stop-loss)
Investor.gov defines a stop order, also called a stop-loss order, as an order to buy or sell a stock once the price reaches a specified price, the stop price. When that price is reached, the stop becomes a market order. A buy stop is placed above the current price and is generally used to limit a loss or protect a profit on a short position. A sell stop is placed below the current price and is used to limit a loss or protect a profit on a stock you own. Remember that once triggered it is a market order in every respect, with everything that means for price.
Stop-limit and trailing stop
According to FINRA, in a stop-limit order reaching the stop price triggers a limit order instead of a market order. That lets you set both when the order activates and the worst price you will accept. The downside is that if the market jumps past your limit, the order may not execute. A trailing stop sets the stop price differently: you ask the broker to sell if the stock falls by a certain percentage or dollar amount from its market price. Not every broker offers every order type, so check what your platform supports.
Stop orders in volatile markets
FINRA devotes a whole page to the risks of stop orders in volatile markets. In a fast move, a stop order may execute at a price very different from the stop price. A short-term swing can trigger the order, and the stock may later return to its earlier level. Once the stop has become a market order and executed, you cannot undo the trade. Adding a limit, that is a stop-limit, protects against a far-off execution but adds the risk that the order does not execute at all. Trading stocks involves risk, and no order type guarantees a full cap on losses.
Time in force: Day, GTC, FOK and IOC
Beyond price, every order needs a time in force. According to FINRA, a day order means the broker will try to fill it during the current trading day. A good-'til-canceled (GTC) order stays active for a period the broker sets, often many months, unless you cancel it. A fill-or-kill (FOK) order executes in full immediately or not at all. An immediate-or-cancel (IOC) order fills as much as possible right away and cancels the rest. There is also all-or-none (AON), which prevents partial fills but stays active until canceled or expired. Check your broker's default setting.
Does a market order guarantee a price?
No. According to investor.gov it guarantees execution but not the execution price, and the last traded price is not necessarily the price you will get.
Why didn't my limit order execute?
A limit order executes only at your price or better. If the market did not reach that price while the order was active, it will not execute.
What is the difference between a stop and a stop-limit?
A stop becomes a market order when the price reaches the stop. A stop-limit becomes a limit order, so it protects the price but may not execute.
How long does a GTC order stay active?
According to FINRA, the broker sets the period, often many months, unless you cancel the order earlier.
This information is for learning and comparison, not investment advice. Verify product details and eligibility conditions against the current source.
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