#OrderTypes101
order types determine how an order is executed. The three main types are market, limit, and stop orders. Market orders are executed immediately at the current market price, while limit orders allow you to specify a price at which you're willing to trade. Stop orders trigger a trade when a specific price is reached, often used for risk management.
Market Orders:
Immediate Execution: Market orders are filled at the best available price in the market.
No Price Guarantee: The price you get may be different from the current quote due to market fluctuations.
Good for Quick Trades: Ideal when you need to enter or exit a trade quickly, but may not be the best choice for volatile markets.
Limit Orders:
Price Control: You specify the price you're willing to pay (buying) or accept (selling).
Not Guaranteed Execution: The order may not be filled if the market price doesn't reach your limit price.
Ideal for Price-Sensitive Traders: Useful when you want to ensure you don't pay more than a certain price when buying or sell for less than a certain price.
Stop Orders:
Conditional Execution: A stop order becomes a market order once the specified "stop price" is reached.
Risk Management: Used to limit potential losses, such as a stop-loss order.
Can Expose You to Slippage: Like market orders, the price you receive may differ from the stop price due to market volatility.