Market, limit or stop order: which do you use, and when?
Three order types cover most trading. A market order fills now at the current price, a limit order fills only at your price or better, and a stop order turns into a market order once a price is reached.
New traders usually default to market orders, but there are situations where each type fits better. Which do you use for:
- entering a trade
- taking profit
- setting a stop-loss
The order types guide explains how each fills in fast markets.
Background: Market, limit and stop orders: which order type to use
The order types on a trading platform decide when and at what price you enter or exit. What each one does, and the mistakes that cost traders money.
What is the difference between a buy limit and a buy stop?
A buy limit is placed below the current price to buy on a dip. A buy stop is placed above the current price to buy if the price breaks higher.
Does a stop-loss guarantee the exit price?
No. A standard stop-loss becomes a market order when triggered and can fill beyond its level in a gap or fast market. Guaranteed stops, where offered, cost extra.
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