#OrderTypes101 Understanding the Basics

When trading stocks, ETFs, or other securities, you'll encounter different order types that determine how and when your trade executes. Here's a beginner's guide to the most common order types:

Market Orders

- What it does: Executes immediately at the current market price

- **When to use**: When you want immediate execution and price isn't your primary concern

- **Risk**: Price may differ slightly from what you saw when placing the order (slippage)

Limit Orders

- **What it does**: Sets a maximum price you'll pay to buy (or minimum to sell)

- **When to use**: When you want control over the price you pay/receive

- **Risk**: Order may not execute if the market doesn't reach your price

Stop Orders (Stop-Loss Orders)

- **What it does**: Becomes a market order when a specified price is reached

- **When to use**: To limit losses or protect profits on an existing position

- **Risk**: May execute at a significantly different price than the stop price in volatile markets

Stop-Limit Orders

- **What it does**: Becomes a limit order when a specified price is reached

- **When to use**: When you want more price control than a regular stop order

- **Risk**: May not execute at all if the price moves through your limit quickly

Good-Til-Canceled (GTC) Orders

- What it does: Remains active until you cancel it or it executes (typically 30-90 days depending on broker)

- When to use: For longer-term strategies where you're waiting for a specific price

Day Orders

- What it does: Cancels automatically if not executed by market close

- When to use: For short-term trading strategies

Other Specialized Order Types

- All-or-None (AON): Requires the entire order quantity to be filled

- Immediate-or-Cancel (IOC): Fills whatever can be filled immediately, cancels the rest

- Fill-or-Kill (FOK): Must be completely filled immediately or canceled

Understanding these order types helps you trade more effectively and manage your risk. Always check with your specific broker as order type availability and exact functionality can vary.