Order types are essential tools in trading that help investors manage risk and execute strategies more effectively. The most basic is the market order, which buys or sells immediately at the best available price—fast, but with less control over the exact execution price. A limit order sets a specific price to buy or sell, offering more control, but it may not be filled if the market doesn’t reach that level.
Stop orders trigger a market order when a certain price is hit, often used to limit losses. A stop-limit order combines both: it triggers a limit order at a set price, providing control even after activation.
Advanced types like trailing stops follow price movements to lock in profits, while fill-or-kill or good-‘til-canceled orders manage execution timing.
Understanding order types allows traders to tailor actions to market conditions and goals, improving efficiency and protecting investments in both volatile and stable markets.