Order Types

When entering or exiting a trade, there are many order types you can use. Keep in mind that while we use shares of stock in most of the examples, the same concepts apply to options. However, when compared to options trading, the fills can be vastly different.

The primary order types are market orders, limit orders, good-til-canceled orders, and stop-loss orders. The following graphic explains the differences between each order type:

Order Types

Of these order types, market orders should be avoided as much as possible. The only exception to this rule is if you absolutely have to get out of a position immediately. However, using limit orders at the bid or ask price is still preferable to using market orders when exiting positions in a hurry.

Due to the predictability of fill prices and the potential for price improvements, the limit order is the recommended order type to use 95% of the time. #OrderTypes101