2.1.1.1.2 Orders Based on Price
Market order. This order is used to request that a stock be bought at the best price currently available. No price is specified on the order, and it is meant to be executed immediately at the current market price. This type of order is always filled.
Limit order. This order is used when the investor wants to specify the price at which the security will be bought or sold. There is no guarantee that the order will be filled, because there is no guarantee that the market will reach the specified price. There are two types of limit orders:
- 1. Buy limit order. This kind of order will execute if the stock can be bought at the specified price or better (lower). The investor will only buy this stock if the price comes down to a certain price. This kind of order is entered at a price below the current market price (buyers want to buy low).
- 2. Sell limit order. This kind of order will execute if the stock can be sold at the specified price or better (higher). The investor will only sell the stock if she can get this price or higher. This order is placed above the current market price (sellers want to sell high).
Stop order. This order is used to trigger a transaction only if the market reaches a certain level, and when this limit is reached, the stop order becomes a market order and is immediately executed at the best price available. As a result, there is no way to predict the actual price the security will receive, but if the trigger