# Order types: market, limit, stop

> Choose how you enter and leave: right now at any price, only at your price, or when a level breaks. See what each order does in a fast drop, with real fill prices.

- 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 6/32, ~26 min
- Source: https://productovi.com/courses/trading/order-types

## Three ways to say "buy"

**Alex Tutor:** Back on your Pebble practice account, today we look at the button behind "Buy". An **order** is your instruction to the broker, and there are three basic kinds.

**Alex Tutor:** A **market order** says: "now, at the best price available". A buy fills at the ask, a sell at the bid. It almost always fills, but you don't choose the price.

**Alex Tutor:** A **limit order** says: "only at my price or better". A buy limit at 39.10 pays 39.10 or less. You choose the price, but it may never fill.

**Alex Tutor:** A **stop order** says: "when the price reaches this level, trade at market". It waits silently. A sell stop below your entry is the usual **stop-loss**: the exit you set before the trade.

![A market order almost always fills but you don't choose the price; a limit gets your price or better but may never fill; a stop waits for a level, then trades at market.](https://productovi.com/courses/trading/diagrams/m2-l2-three-orders.png)

> **Exercise:** Match each order with what it promises.

**Alex Tutor:** Stops work for entries too. A buy stop sits above the price and enters only if a level breaks. Try picking one.

> **Exercise:** Bluefin Energy trades at 40.00. You want to buy only if the price breaks above 41.00. Which order does that?

**Sofia:** So which one is the safe choice?

**Alex Tutor:** None is safe on its own. Each one trades something away. The best way to feel it is to watch all three in two fast minutes on Bluefin Energy.

![A blue pebble bounces down stone steps and skips over the net Marc holds out; far below, Nora holds up a basket the pebble never reaches.](https://productovi.com/courses/trading/diagrams/m2-l2-scene.png)

## Two minutes of Bluefin Energy

**Marc:** This morning I bought 100 Bluefin Energy at market at 10:00:30 and put a sell stop at 39.00. If it hits, I lose about 100 dollars. That was my plan.

**Nora:** Then some news hit at 10:01 and it dropped like a stone. I put in a buy limit at 39.10 to catch the dip. And one more, cheeky, at 38.60.

**Alex Tutor:** Here are Pebble's quotes, every 5 seconds. Pebble's rules: a market buy fills at the ask of that row; a buy limit fills at the first ask at or below the limit; a sell stop triggers on the first bid at or below the stop and sells at that bid.

> **Pebble's fill rules and the orders that morning**
>
> How Pebble fills orders against its quotes:
> - **Market buy:** fills at the ask of that row.
> - **Buy limit:** fills at the first ask at or below the limit.
> - **Sell stop:** triggers on the first bid at or below the stop and sells at that bid.
>
> Orders on Bluefin Energy that morning:
> - **Marc:** a market buy of 100 shares at 10:00:30, then a sell stop at 39.00.
> - **Nora:** two buy limits, both placed at 10:01:00, one at 39.10 and one at 38.60.

**Dataset (CSV):** [Bluefin Energy quotes, 10:00–10:03](https://productovi.com/datasets/trading/order-types/m2_bfe_quotes.csv)

Every 5 seconds. The news comes out at 10:01:00.

- `time`: Time of the quote
- `bid`: The best price a buyer pays; you sell here
- `ask`: The best price a seller takes; you buy here
- `last`: The price of the latest trade

**Sofia:** Marc's market buy at 10:00:30 filled at the ask, 40.00. So his plan was 40.00 down to 39.00, one dollar a share.

**Alex Tutor:** Right: 100 shares × 1.00 = 100 dollars planned. Now find the row where his stop wakes up, and the price he actually gets.

> **Exercise:** Marc's sell stop is at 39.00. At what price are his 100 shares actually sold?

**Marc:** So the stop wasn't a promise of 39.00.

**Nora:** The price just jumped right over it?

**Alex Tutor:** No. A stop is a trigger, not a price. In a fast market the next price can be lower, and the gap is **slippage**. How much did the whole trade cost Marc?

![Marc bought at 40.00; after the news the bid fell from 39.10 straight to 38.92, so his stop at 39.00 sold at 38.92, 8 cents below the stop.](https://productovi.com/courses/trading/diagrams/m2-l2-stop-slippage.png)

> **Exercise:** Marc bought 100 shares at 40.00 and sold them at the stop's fill price. What is his real loss, in dollars? Ignore commission.

## Nora's limits

**Alex Tutor:** Now Nora's two buy limits, both placed at 10:01:00. Check each ask from that row on.

**Nora:** The 39.10 one filled at 10:01:30, and at 39.00, not 39.10!

**Alex Tutor:** "Your price or better": the ask fell straight from 39.12 to 39.00, so you got the better price. And the 38.60 order?

> **Exercise:** What happened to Nora's buy limit at 38.60?

**Nora:** So my cheeky order was just too greedy?

**Alex Tutor:** It was a fair price to wish for; the market just never offered it. A limit protects your price and accepts that the trade may not happen.

![Nora's limit at 39.10 filled at 39.00, a better price; the lowest ask was 38.88, so her limit at 38.60 never filled.](https://productovi.com/courses/trading/diagrams/m2-l2-limits.png)

**Alex Tutor:** And a market buy at 10:01:15 would have paid 39.46, with a 16-cent spread instead of the calm 4. In a fast move, market orders pay for speed.

**Alex Tutor:** Check the spread yourself in that row and compare it with the calm 4 cents.

> **Exercise:** In Pebble's Bluefin Energy quotes, what was the spread at 10:01:15, in cents? (At 10:00:30 it was 4 cents.)

> **Exercise:** A stop order at 39.00 guarantees that you sell at 39.00.

**Marc:** I still use stops. 108 dollars hurts less than holding and hoping. I just plan for a bit of slippage.

**Nora:** Fine. But I still want one simple answer.

**Alex Tutor:** Exactly. There is also a buy stop above the price, to enter only if a level breaks. Same rule: a trigger, then a market fill.

**Alex Tutor:** Before you answer Nora, one check on the whole picture.

> **Exercise:** Which statement about market, limit and stop orders is accurate?

> **Exercise:** Nora asks: "Which order should I use, then?" In 2–3 sentences, explain the trade-off between market and limit orders, using one number from the Bluefin quotes.

> **Key ideas**
>
> - **Market order:** fills now at the ask (buy) or bid (sell); sure fill, unknown price.
> - **Limit order:** your price or better; known price, maybe no fill. The 38.60 limit never filled.
> - **Stop order:** a trigger that becomes a market order. Marc's stop at 39.00 filled at 38.92: planned loss 100, real 108.
> - In a fast move spreads widen (4 → 16 cents here), so every market fill costs more.

> **Educational, not advice**
>
> This course explains how trading works; it never tells you what to buy or sell. Most people who trade lose money, and you can lose all of it. A stop limits a loss only roughly; it is not a guarantee. For taxes and rules, ask a licensed professional where you live.

- Previous lesson: [Exchange, broker, instruments: a map](https://productovi.com/courses/trading/exchange-broker-instruments.md)
- Next lesson: [Bid, ask, spread and liquidity](https://productovi.com/courses/trading/bid-ask-liquidity.md)

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