Lesson 3 of 7 · 2 min
Order types
Market, limit and stop orders — what each guarantees, and what each one costs you.
Each order type trades one kind of risk for another. Know which risk you're taking before you click.
Market order
Fills immediately at the best available price. You get certainty of a fill and accept price uncertainty — you pay the spread, and in fast markets you can slip several ticks.
Limit order
Buys at your price or lower, sells at your price or higher. You get price certainty and accept fill uncertainty: price can touch your level without filling you, because of the queue ahead of you.
Adverse selection
A limit order that fills instantly in a fast market is often filling because price is running straight through your level against you. Fills aren't random — they're more likely exactly when you'd least want them.
Stop order
Sits dormant until price trades at the stop, then becomes a market order (stop-market) or a limit order (stop-limit).
- Stop-market can slip in a fast move — but it gets you out.
- Stop-limit protects price but may not fill at all if the market gaps through it. For protective stops, that is usually the worse problem.
Brackets (OCO)
Most platforms let you attach a stop and a target to an entry; when one fills, the other cancels. It means your risk is defined the moment you're in.
Trading implication
Your protective stop goes in with your entry, every time.
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