Understanding Common Trade Orders: A Beginner’s Guide

4 Most Common Trade Order

Stop Buy Order: An order placed at a stop price above the current market price. This is used when a stock is fluctuating at a certain price level but hasn’t had a breakthrough. For example, if a stock is fluctuating between $40-$50, let’s say you place a stop buy order at $52. If the stock starts to rise above $52, your order will be executed.

Market Order: An order to buy or sell a security instantly at the current market price. This type of order guarantees execution but not the execution price. It executes between the current bid (for a sell order) or ask (for a buy order) price.

Limit Order: An order to buy or sell a security at a specific price. For example, if you submit a limit order to buy a stock for $50, the trade will only execute at that price or lower. This is ideal when you’re not in front of your computer. You can place a limit order and forget about it; if it gets executed, your broker will email you.

Stop Loss Order: This order is placed to avoid further loss. You own a stock at $113. If you want to sell when the price falls below $100, you would place a stop loss order at $100. When the stock reaches this price, the order is executed.