#OrderTypes101 "Order Types 101" is a fundamental guide to the different instructions you can give to a brokerage or exchange when you want to buy or sell a financial asset. Understanding these types is crucial for controlling your entry and exit prices, managing risk, and executing your trading strategy effectively.

Here are the most common order types:

1. **Market Order:**

* **What it is: An order to buy or sell immediately at the best available current price.

* **How it works: It guarantees execution, but **not** a specific price. Your order will be filled against the best available opposing orders on the order book.

* **When to use: When you prioritize immediate execution over a precise price, for highly liquid assets, or when speed is critical.

* **Risk: You might get a price higher than expected when buying, or lower than expected when selling, especially in fast-moving or illiquid markets (known as slippage).

2. **Limit Order:**

* **What it is: An order to buy or sell an asset at a specific price or better.

How it works:

* **Buy Limit Order: Placed below the current market price. It will only execute if the price falls to your specified limit price or lower.

* **Sell Limit Order: Placed above the current market price. It will only execute if the price rises to your specified limit price or higher.

* **When to use: When you want to control the price you pay or receive, are willing to wait for your desired price, or want to avoid slippage.

* **Risk: There's no guarantee your order will be filled. If the market doesn't reach your limit price, your order will remain open or expire unfilled.

3. **Stop Order (often called a Stop-Loss Order):**

What it is: An order that becomes a market order once a specified "stop price" is reached or passed.

How it works:

Buy Stop Order: Placed above the current market price. Once the price hits or exceeds the stop price, it triggers a market buy order. (Used for covering short positions or buying into an uptrend).