# Case: place the right order > Three situations on a practice account: pick the order type, the price and the size, and say why, using the quotes, the spread and what a gap can do to a stop. - Course: [Trading Basics: How It Works, How Not to Lose Everything](https://productovi.com/courses/trading.md) - Module: How does a market work under the hood? - Lesson 8/32, ~41 min - Source: https://productovi.com/courses/trading/choose-the-right-order ## Three tickets **Alex Tutor:** Back on your Pebble practice account, today you place the orders yourself. Marc and Nora each bring a situation, and there's one more about a stop. For each: which order, at what price, how many units, and why. ![Alex writes three order tickets at a table, one marked in blue, while Nora and Marc each hold out a slip with their situation.](https://productovi.com/courses/trading/diagrams/m2-l4-scene.png) **Alex Tutor:** Here are the three quote snapshots. Pebble's rules as before: a market buy fills at the ask, a buy limit at your price or better, and a sell stop sells at the first bid at or below the stop. **Dataset (CSV):** [Three situations, three quotes](https://productovi.com/datasets/trading/choose-the-right-order/m2_order_case.csv) A is the Harbor 20 fund at midday, B is Spark Coin at 20:00, C is Northwind Foods five minutes before the close. - `situation`: A, B or C - `bid_size`: Units waiting at the bid - `ask_size`: Units waiting at the ask > **The three situations** > > Quotes for each situation are in the snapshot table. Pebble's rules: a market buy fills at the ask, a buy limit at your price or better, a sell stop sells at the first bid at or below the stop. > - **A. Harbor 20 at midday.** Marc wants about 2,000 dollars in the fund, whole shares only, no hurry. > - **B. Spark Coin at 20:00.** Nora wants 500 coins right now. Behind the 150 coins at 2.45 wait 200 at 2.47 and 250 at 2.50. At midday Spark Coin's spread is usually 2 cents. > - **C. Northwind Foods at 15:55.** You hold 100 shares bought at 48.00 with a sell stop at 46.50. The company reports tomorrow before the open; after its last report it opened 4% lower. **Alex Tutor:** Before the first ticket, put the steps of writing one in order. The same steps work for all three. > **Exercise:** Put the steps of writing an order ticket in a sensible order. ## A: the calm fund **Marc:** Situation A. I want to put about 2,000 dollars into Harbor 20 and hold it for a while. No hurry, and I won't buy fractions of a share. **Sofia:** Midday, a 2-cent spread and thousands of units at the ask. That's a deep market. **Alex Tutor:** Why does the order type hardly matter in A? Pick the reason the numbers give. > **Exercise:** In situation A, Harbor 20 at midday shows bid 112.39, ask 112.41 and 3,790 units at the ask; Marc needs 17. Why do a market order and a limit at the ask give almost the same result? **Alex Tutor:** So the order type barely matters here; a limit at the ask simply makes sure nothing surprises you. The real question is the size. > **Exercise:** Marc buys whole shares of Harbor 20 at the ask, 112.41, with at most 2,000 dollars. How many shares can he buy? **Marc:** The 89 dollars left over just stay in cash. I always round down: a budget I stretch once is a budget I'll stretch again. ![At 112.41 a share, 17 whole shares cost 1,910.97 and about 89 stays in cash; an 18th share would take the cost to 2,023.38, over the 2,000 budget.](https://productovi.com/courses/trading/diagrams/m2-l4-budget.png) ## B: the coin at night **Nora:** Situation B. It's 20:00 and I want 500 Spark Coins right now, at market. Spark trades all night, so what's the problem? **Alex Tutor:** Look at ask_size: only 150 coins wait at 2.45. Behind them sit 200 at 2.47 and 250 at 2.50. A market order for 500 climbs through them. **Sofia:** And the spread is 10 cents on a 2.40 mid, more than 4%. > **Exercise:** Which ticket fits situation B best? **Alex Tutor:** Say Nora sends a buy limit at 2.45 for all 500 anyway. How much of it fills at once? > **Exercise:** At 20:00 Spark Coin's asks are 150 coins at 2.45, 200 at 2.47 and 250 at 2.50. Nora places a buy limit at 2.45 for 500 coins. How many coins fill right away? **Marc:** And a coin at night is the riskiest place to be in a hurry. If it can't wait until tomorrow, it's probably a mood, not a plan. ## C: the stop before a report **Alex Tutor:** Situation C. You hold 100 Northwind Foods bought at 48.00, and a sell stop sits at 46.50. Northwind reports results tomorrow before the open. It's 15:55, bid 48.16. **Sofia:** If the stop fills at 46.50, I lose 1.50 × 100 = 150 dollars. That's my plan. **Alex Tutor:** On a normal day, roughly. But a report can make the price open far from today's close. After the last report Northwind opened 4% lower. That's a **gap**: the price jumps over the levels in between. > **Exercise:** You hold 100 Northwind Foods shares bought at 48.00, with a sell stop at 46.50. Tomorrow Northwind opens 4% below today's 48.16 bid, at 46.23, and your stop sells at that open. What is the loss on the 100 shares, in dollars? **Nora:** So the stop is useless before a report? **Alex Tutor:** Not useless, just not a ceiling. If 177, or more, is too much, the choice is made today: sell some or all now, at about 48.16, or hold fewer shares through the report. ![The stop at 46.50 plans a 150-dollar loss, but if Northwind opens 4% lower at 46.23 after the report, the stop sells there and the loss is 177.](https://productovi.com/courses/trading/diagrams/m2-l4-report-gap.png) **Sofia:** So the stop protects me on a normal day, and the size protects me on a report day. > **Exercise:** With a sell stop at 46.50, the most you can lose on 100 shares bought at 48.00 is 150 dollars. **Alex Tutor:** If 150 is truly your limit, the fix is in the size. How many shares could stay through the report? > **Exercise:** You hold Northwind Foods bought at 48.00 and want to lose no more than 150 dollars even if the price opens 4% lower at 46.23 after the report. What is the largest whole number of shares you can keep through the report? **Marc:** I write down the gap risk next to the stop in my journal. Then the number I live with is honest. **Nora:** All right, I'll write my tickets down, not just tap. **Alex Tutor:** Before the full case, one short explanation for Nora. > **Exercise:** Nora asks: "Why not just use market orders for everything? They always fill." In 2–3 sentences, answer with one number from situations A–C. **Alex Tutor:** Time for the module's case. Put all three tickets together, the way you would write them in a journal before tapping anything. **Nora:** Can I just write "market" three times? **Alex Tutor:** You can, if the numbers say so. In two of the three, they don't. Give a price, a number of units and a reason for each. **Sofia:** And for C, the loss I'm really ready for, not just the one on the stop. > **Exercise:** Write the three order tickets and say why. > **Educational, not advice** > > This lesson is educational, not advice. Most people who trade lose money, and you can lose all of it. Stops are not guarantees, and coins and thin markets can jump wildly. Ask a licensed professional where you live about taxes and rules. - Previous lesson: [Bid, ask, spread and liquidity](https://productovi.com/courses/trading/bid-ask-liquidity.md) - Next lesson: [Risk per trade: a small share of the account](https://productovi.com/courses/trading/risk-per-trade.md) --- Productovi Learning. Free, no sign-up needed to read.