In short: An order type determines how your broker executes your buy or sell. A market order is fast but has no fixed price. A limit order has a fixed price but may not be executed. A stop order only becomes active when the price reaches a certain level.
Step by step
- Decide what matters most to you right now: fast execution or certainty about the price.
- Choose the order type that fits (see the explanations below).
- Check the price, quantity, order type and validity in your order ticket.
- After placing the order, watch its status: open, partially filled, filled or cancelled.
- Try order types in a demo account first, without real money. See the paper trading guide.
Market order: fast, but the price is not fixed
A market order buys or sells immediately at the best price available at that moment. It is like the express lane in a supermarket: you are served right away, but you pay what the price tag says.
Example (hypothetical): stock X shows a bid of €20.00 and an ask of €20.02. You place a market order to buy 100 shares. By the time your order reaches the exchange, the lowest selling price is €20.03. You pay €2,003 instead of €2,002. That difference is called slippage.
For stocks that trade a lot (liquid stocks), slippage is usually small. For thinly traded stocks the difference can be large. Read more in bid-ask spreads.
Be careful with:
- thinly traded stocks (low liquidity);
- orders outside trading hours;
- orders that are large compared with normal trading volume.
Limit order: fixed price, no certainty of execution
With a limit order you set the price limit yourself. A buy limit only buys at your limit or lower. A sell limit only sells at your limit or higher. It is like bidding at an auction: you never pay more than your bid, but you may not get the item.
Example (hypothetical): stock X is at €20.00. You place a buy limit for 100 shares at €19.50.
- If the price falls to €19.50 or lower, your order is executed at €19.50 or better.
- If the price stays above €19.50, your order is not executed.
- If the price keeps rising, you miss that move.
A limit order protects you from paying more than you want, but it does not guarantee you get in. One order type is not always better than another.
Stop-loss order: a pre-set sell order
A stop-loss order becomes active when the price reaches a pre-set level (the stop price). Your broker then sells your shares, usually as a market order. This lets you set a limit on the loss you accept in advance.
Example (hypothetical): you buy 100 shares of X at €20.00 and set a stop-loss at €19.00. If the price falls to €19.00, your order becomes a market order. You sell around €19.00 and your loss is about €100, plus any costs.
A stop-loss is not a guarantee
- Gap: if the stock closes at €20.00 and opens at €17.00 the next day after bad news, your stop is only executed at the open, around €17.00. Your loss is then larger than planned.
- Fast markets: in violent price swings the execution price can differ from your stop.
- Short dip: a stop can be hit by a temporary drop, after which the price recovers.
A stop-loss helps you set a loss limit in advance. It does not protect against every risk. You can work out how much you risk per trade with the risk per trade calculator.
Other order types
Stop-limit order
A combination of stop and limit. When the stop price is hit, a limit order is placed. So you also set the lowest selling price. The downside: if the price jumps past your limit, the order is not executed and you stay in the position.
Example (hypothetical): stop €19.00, limit €18.80. If the stock opens at €17.00, your order is not executed because €17.00 is below your limit.
Trailing stop
A trailing stop follows the price at a fixed distance (in euros or percent). If the price rises, the stop moves up with it. If the price falls, the stop stays put. Not all brokers offer this, and how it works can differ.
Validity: day order or GTC
- Day order: the order expires at the end of the trading day if it has not been executed.
- GTC (good till cancelled): the order stays active until it is executed or you cancel it. Many brokers set a maximum duration. Check this with your broker.
Quick overview
| Order type | Fixed price? | Execution certain? | Fits |
|---|---|---|---|
| Market order | No | Usually | Getting in or out quickly in liquid stocks |
| Limit order | Yes (your limit or better) | No | Price control |
| Stop-loss | No (becomes a market order) | Usually | Setting a loss limit in advance |
| Stop-limit | Yes (your limit) | No | Setting a floor on the selling price |
| Trailing stop | No | Usually | A stop that moves with the price |
Which order types are available differs per broker and per exchange. Compare brokers in the comparison tool and check that your broker is supervised by a regulator such as the Dutch AFM.
Investing involves risk: you can lose some or all of your money. This tutorial is information, not investment advice.
Work it out yourself
Test yourself
Practice questions to check your understanding, not advice.
What characterises a market order?
- It is executed immediately, but the price is not fixed
- The price is fixed, but execution is not certain
- It only becomes active when the price reaches a certain level
Show answer
Answer:A. It is executed immediately, but the price is not fixed
A market order buys or sells immediately at the best available price. The second description fits a limit order, the third a stop order.
Share X trades at €20.00. You place a buy limit for 100 shares at €19.50 and the price stays above €19.50. What happens?
- The order is executed at €20.00
- The order is executed at €19.50
- The order is not executed
Show answer
Answer:C. The order is not executed
A buy limit only buys at your limit or lower. If the price stays above €19.50, the order is not executed.
You place a market order for 100 shares. The ask is €20.02, but at execution the lowest sell price is €20.03. How much extra do you pay because of this slippage?
- €3
- €1
- €100
Show answer
Answer:B. €1
You pay €2,003 instead of €2,002 (100 × €20.03 minus 100 × €20.02). The difference is €1.
You buy 100 shares of X at €20.00 and set a stop-loss at €19.00. The price falls to €19.00 and your order is executed around €19.00. Roughly how large is your loss, excluding costs?
- €100
- €19
- €1,900
Show answer
Answer:A. €100
You lose about €1.00 per share (€20.00 minus €19.00). On 100 shares that is about €100, plus any costs.
A share closes at €20.00 and opens the next day at €17.00 after bad news. You have a regular stop-loss at €19.00. At roughly what price is your order executed?
- Exactly €19.00
- It is not executed
- Around €17.00
Show answer
Answer:C. Around €17.00
With a gap the stop is only executed at the opening, around €17.00. Your loss is then larger than planned.
Frequently asked questions
- What is the difference between a stop-loss and a stop-limit order?
- A stop-loss becomes a market order once your stop price is hit. It is almost always executed, but the price is not fixed. A stop-limit becomes a limit order once your stop price is hit. The lowest selling price is then fixed, but the order may not be executed. If the price drops sharply, a stop-limit may leave you stuck in the position.
- Is a stop-loss always executed at my stop price?
- No. A regular stop-loss does not guarantee the price. If a stock opens far below your stop price after bad news (a gap), your order is executed at the first available price, which can be lower than your stop. Some brokers offer a guaranteed stop for a fee. Read your broker's terms.
- What is the difference between a stop-loss at the broker and a 'mental stop'?
- A stop-loss at the broker is already in the system and is executed automatically. A mental stop is a promise to yourself to sell later. That means you have to actually press the button at that moment, even when the loss hurts. An order at the broker takes that decision out of the moment, but it can also be triggered by a short-lived dip.
- What happens if I place a market order outside trading hours?
- The order usually waits until the exchange opens and is then executed at the price at that moment. That price can differ a lot from the last closing price, for example because of news in the meantime. A limit order gives you more control because you set a maximum buying price or minimum selling price. Which order types work outside trading hours differs per broker.
- How far from my entry price should my stop-loss be?
- There is no fixed answer. It depends on how much this stock normally moves, how long you plan to hold it and how much loss you can afford. A stop very close to your entry price is hit more easily by normal price swings. A stop far away means a larger loss per share. Use the [position size calculator](/en/tools/position-size) to work out how many shares fit your stop distance.