What Is a Trading Order? Market, Limit, and Stop Orders Explained
An order is your instruction to an exchange to buy or sell an asset on specific terms. Here are the types of orders and which one to choose in different situations.
What it is
An order is an instruction to the exchange: what to buy or sell, how much, and at what price. Buy and sell orders are collected in the order book, and when the prices match, a trade happens.
Main types
| Order | How it works | When to use it |
|---|---|---|
| Market | Fills immediately at the best available price | You need to get in or out right away |
| Limit | Fills at your price or better | You want to control the price |
| Stop order | Triggers when the price reaches a level | To limit a loss: a stop-loss |
| Take-profit | Closes the trade at the target | To lock in a profit |
Pros and cons
- Market: fills immediately, but the price may be worse. During a sharp move, slippage is possible.
- Limit: fills at your price or better, but may not fill at all.
- A stop order protects against large losses and should be in place on every trade.
Orders that wait for their price are called pending orders; there's a separate article on them: pending order. A detailed breakdown with examples is in the article market, limit, and stop orders and the lesson brokers, accounts, and order types.
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- An order is an instruction to the exchange to buy or sell.
- Market is fast; limit is at your price.
- Every trade needs a stop-loss.
Frequently Asked Questions
Which order should a beginner use?
For entries, a limit order is often more convenient: you know the price in advance. For protection, always set a stop-loss right after entering.
Can I cancel an order?
Yes, as long as it hasn't been filled. A filled trade can't be canceled, only closed with an opposite trade.
Why didn't my limit order fill?
The price didn't reach your level, or there weren't enough matching orders at that price.
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