Every trade in the financial markets starts with an order. An order is a set of instructions you give your broker to buy or sell a financial instrument like a stock, currency pair, or index. It tells the broker what to trade, how much to trade, and at what price (if any).
Orders are the foundation of all trading activity – from long-term investing to short-term speculation. Understanding the types of orders available is essential to managing both your entry and exit points in a trade.
Types of Trading Orders
1. Market Orders
A market order is the simplest type of order. It tells the broker to execute your trade immediately at the best available price. This is useful when you prioritise speed over precision.
Example: You want to buy shares of Company X, which is currently trading at $100. You place a market order, and your broker fills it at $100.05 due to slight price movement during execution.
2. Limit Orders
A limit order sets a specific price at which you’re willing to buy or sell. The trade will only execute if the market reaches that price or better.
Example: You want to buy at $98 instead of $100. You place a buy limit order at $98. If the market dips to that level, your trade is executed.
3. Stop Orders (Preview)
Stop orders automatically trigger a trade when the price hits a specified level. These are often used to protect against losses or secure profits. You’ll learn more about these in Lesson 2.
Why Order Types Matter
Choosing the right type of order depends on your trading strategy, risk tolerance, and market conditions. Market orders are fast but can lead to slippage, while limit orders offer price control but may not be filled at all. Learning when and how to use each one is key to trading effectively.
Quick Recap
- ✅ An order tells your broker what and how to trade
- ✅ Market orders execute instantly at the best price available
- ✅ Limit orders execute only at your chosen price or better
- ✅ Stop orders add automation to help manage risk (coming next lesson)
Interactive Tip 💡
Next time you’re using a demo account, try placing both a market and a limit order. Watch how execution speed and price outcomes differ in real-time.
Next up: Lesson 2 – Using Stop Orders