Order types
Six instructions cover almost everything anyone does. The differences between them are where beginners lose money without ever being wrong about direction.
An order is an instruction, not a wish. Each type says something precise about price and about certainty, and every one of them trades one for the other.
Market order
Execute now, at whatever the book offers. Guarantees that it happens; guarantees nothing about price. On a deep market the difference is negligible. On a thin one, or during a violent move, it can be substantial — this is where slippage arrives.
Limit order
Execute only at my price or better. Guarantees price; guarantees nothing about execution. It rests in the book until it fills, until you cancel it, or forever. A limit buy sits below the market; a limit sell sits above it.
The trap is quiet: a limit order that does not fill leaves you with no position while you believe you have one. Watching a move happen without you because your order was ten units away is an ordinary experience.
Stop-loss
If the price reaches this level, get me out. It is dormant until touched, and at that moment it becomes a market order — which is exactly why it does not guarantee your exit price.
A stop-loss caps your intention, not your loss
It converts to a market order when triggered and fills against whatever depth exists then. In a fast fall, that can be far below your stop. The protection is real and it is not a floor.
Stop-limit
The same trigger, but it places a limit order rather than a market one. You avoid a terrible fill — and you accept the possibility of no fill at all, with the position still open and the price still moving. Choosing between stop-loss and stop-limit is choosing which failure you prefer: a bad exit, or no exit.
Take-profit
A limit order in the other direction, resting above (for a long) and closing the position if reached. Mechanically it is nothing new. Its value is behavioural — the decision gets made while calm, and executes without you being at the screen at four in the morning.
Trailing stop
A stop that follows the price at a fixed distance and never moves back. If it started five per cent below and the price rises ten, the stop has risen too and now sits five per cent below the new level. It locks in a portion of a move without requiring you to decide when it ends.
The cost is that ordinary noise takes you out of trends. A distance tight enough to protect much is tight enough to be hit by a normal fluctuation.
Price or certainty. Never both.
Market orders buy certainty with price. Limit orders buy price with certainty. Every other type is a rule about when one of those two is placed on your behalf.
The settings around the order
Beyond the type, most venues offer modifiers. They are worth recognising rather than memorising.
- Good till cancelledThe order rests indefinitely. The usual default, and the reason people find forgotten orders filling weeks later.
- Immediate or cancelFill whatever is available right now, cancel the rest. Useful when a partial fill is acceptable and a resting order is not.
- Fill or killAll of it immediately, or none of it. Refuses partial fills.
- Post onlyReject the order if it would execute immediately. Guarantees maker treatment, and its cheaper fee, at the cost of possibly not being placed at all.
- Reduce onlyOn derivatives: this order may only shrink an existing position, never open a new one in the other direction. A guardrail against a fat-finger flip.
One thing worth doing before any of it
Place a small limit order on a deep pair, well away from the market, and watch it sit in the book. Then cancel it. It costs nothing, and it converts every paragraph above from description into something you have seen happen.
The reason to learn the mechanics thoroughly is not that they make you profitable. It is that misunderstanding them loses money independently of whether your view was right — and that is an avoidable category of loss.