What is a trading order?
A trading order is an instruction sent to a broker or trading platform to buy or sell a financial asset. The order type helps determine how the instruction is handled in the market.
Different order types involve different trade-offs. Some prioritize execution, while others set limits on the acceptable price. An order may be filled completely, filled partially, or not filled at all.
Common order types
Market Orders
A market order requests an immediate purchase or sale at the best available prices. Execution is generally prioritized over getting a specific price, so the final price may differ from the last displayed price.
Example: You submit a market order to buy shares at the best available prices.Limit Orders
A limit order sets the maximum price you are willing to pay when buying, or the minimum price you are willing to accept when selling. Execution is not guaranteed.
Example: You set a buy limit at $50. The order may execute at $50 or lower, if available.Stop Orders
A stop order becomes a market order when its stop price is reached. The execution price can be different from the stop price, particularly in fast-moving markets.
Example: A sell stop at $45 may trigger if the market reaches that level.Order Duration
Order duration determines how long an order remains active. A day order generally expires at the end of the trading day if it has not executed. A good-till-cancelled order can remain active longer, subject to broker rules.
Always check your broker’s order-duration options and cancellation rules.Buying versus selling
When you buy an asset, you generally want to understand the price you may pay, the costs involved, and why you are entering the trade. When you sell, consider the price you may receive, any applicable fees, and how the sale fits your plan.
A short sale is different from selling an asset you already own. Short selling can involve additional requirements and potentially substantial losses, so beginners should understand the risks before considering it.
Example: choosing an order
You want to buy a share
Imagine a stock is currently quoted at a bid of $49.95 and an ask of $50.00. A market buy order may execute near the available ask prices, but the final execution price is not guaranteed. A buy limit order at $50.00 sets your maximum purchase price, but it may remain unfilled if sellers are not available at that price or lower.
Before you submit an order
- Check the asset: Confirm the correct stock, fund, currency pair, or other instrument.
- Check buy or sell: Verify the direction and quantity.
- Review the order type: Understand whether you are using a market, limit, or stop order.
- Review the costs: Check commissions, spreads, and any other applicable fees.
- Confirm duration: Know when an unfilled order may expire.
- Understand the risk: Consider how much you could lose before placing the order.
Beginner tip
Practise using a paper-trading account or simulator before placing orders with real money. Learn how your platform handles each order type, including its fees and execution rules.
How Prices Move
Review buying and selling pressure, bid and ask prices, spreads, and candlesticks.