Picking a stock gets most of the attention, but the order you use to buy or sell it decides the price you actually get. Choose the wrong one in a fast market and you could pay more than you expected, sell for far less than you planned, or never get filled at all.
This guide walks through the four order types almost every brokerage app offers, how long an order stays alive, and a few clearly labeled hypothetical examples so you can see what each one does with real numbers.
What is the difference between a market, limit and stop order?
A market order buys or sells right away at the best price available, so it favors speed over price. A limit order sets the highest price you will pay or the lowest you will accept, so it favors price over speed. A stop order sits quietly until a trigger price is hit, then turns into a market order.
Everything else, including stop-limit and trailing stop orders, is a variation on those three ideas. The trade-off never changes: the more control you want over price, the less certain you can be that your order will fill. Brokerages do not all offer every order type, and some use similar names for different orders, so the SEC's investor education office advises checking your own firm's rules before relying on any of them.
Market orders: fast, but the price is not locked in
A market order tells your broker to buy or sell at the best price it can find right now. FINRA says it is the most common order type and is usually the default on brokerage platforms. It gives you the most certainty that your trade will happen, but not the price you saw on screen. As the SEC's bulletin on order types puts it, "the price at which a market order will be executed is not guaranteed." SEC: Understanding Order Types
Why would the price change? Quotes move constantly, and the shares offered at the best price may be gone by the time your order arrives. The SEC gives an example of an investor buying 1,000 shares when the best offer is $3.00: the order could fill 500 shares at $3.00 and the rest at a higher price if there are not enough shares available at $3.00.
Hypothetical example: say a stock shows a last trade of $50.00, with sellers offering shares at $50.05. You place a market order for 20 shares, expecting to spend about $1,001. If the price ticks up while your order is routed and you fill at $50.15, you pay $1,003. That $2 difference is small for a heavily traded stock in calm conditions. In a thinly traded stock, at the opening bell or during breaking news, the gap can be much larger.
Limit orders: you name the price
A limit order lets you set your own price. A buy limit order can fill only at your limit price or lower, and a sell limit…
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Content on The Evergreen Edit is for educational and informational purposes only and is not individualized financial, investment, tax or legal advice. Learn more.
Compound growth estimate
Estimated total
$17,175
Your contributions
$13,000
This is an estimate, not a prediction. Monthly compounding; taxes, fees and inflation are excluded.
This article is for educational purposes only and isn't personalized financial, tax or legal advice. Consider talking with a qualified professional about your situation.
Kiara Miller — Founder & Editor
Kiara Miller is the founder and editor of The Evergreen Edit. He has been doing independent finance research for two decades and reviews every article before it's published.
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