Order types

An order is the instruction you give the market to enter or exit a position, and the type you choose decides two things at once: the price you are willing to trade at, and the moment the trade happens. Some orders fill immediately, while others wait for a price you name in advance. Knowing the difference turns a vague intention into a precise instruction.

Market orders: trade now

A market order tells the broker to fill your trade immediately at the best price currently available. You buy at the ask and sell at the bid, so the price you receive is whatever the market is showing at that instant. A market order prioritises certainty that the trade happens over certainty of the exact price.

Pending orders: trade at a level you set

A pending order sits in the market and waits. Instead of filling now, it triggers only when price reaches a level you name in advance, and it can be cancelled while it waits. Pending orders fall into two families that differ by where they sit relative to the current price: limit orders and stop orders.

• Buy limit, sits below the current price and fills if price falls to that level, giving a lower entry than the market shows now.
• Sell limit, sits above the current price and fills if price rises to that level, giving a higher entry than the market shows now.
• Buy stop, sits above the current price and fills only after price rises through that level, entering as the move continues upward.
• Sell stop, sits below the current price and fills only after price falls through that level, entering as the move continues downward.

In broad terms, limit orders are associated with entering on a pullback to a more favourable price, and stop orders with entering on a breakout as price moves through a level. Neither is better in itself; they simply describe different conditions under which a trade is allowed to open. As an illustration, suppose a pair trades at 1.2000: a buy limit placed below it waits for a dip, while a buy stop placed above it waits for a push higher.