Module 9: Order Types

Understanding order types is essential for executing your trading plan with precision.[^25]

Market Orders

A market order executes immediately at the best available current price. Use when you need instant entry/exit and price precision is less important than speed. Risk: In volatile or illiquid markets, you may receive a worse price than expected (slippage).[^25]

Limit Orders

A limit order instructs your broker to execute at a specific price or better:[^26][^25]

• Buy limit: Placed below the current price. Executes at the limit price or lower.
• Sell limit: Placed above the current price. Executes at the limit price or higher.
• Risk: The order may never fill if price doesn't reach your limit.[^25]

Stop Orders

A stop order becomes a market order once the specified "stop price" is reached:[^25]

• Sell stop (stop-loss): Placed below the current price. When triggered, sells at the best available price. Used to limit losses on long positions.
• Buy stop: Placed above the current price. Used to enter on breakouts or limit losses on short positions.
• Risk: In fast markets, the fill price may differ from the stop price (slippage).[^25]

Stop-Limit Orders

Combines a stop order and a limit order. You set two prices: a stop price (trigger) and a limit price (maximum/minimum execution price). When the stop price is hit, the order becomes a limit order instead of a market order.[^27][^25]

• Benefit: Price control after the trigger.
• Risk: If price gaps past your limit, the order won't fill, leaving you exposed.[^27]

Time-in-Force Options

• Day Order (DAY): Expires at the end of the trading session if not filled.
• Good-Til-Canceled (GTC): Remains active until filled, expired, or canceled (brokers often set a maximum, e.g., 60 days).[^26]
• Immediate or Cancel (IOC): Must fill immediately (partially or fully) or cancel.
• Fill or Kill (FOK): Must fill entirely and immediately or cancel completely.