Order Types and Execution
Knowing when and how to use different order types is not a minor detail — it directly impacts your entry price, slippage, and risk management.
Market Orders
A market order fills immediately at the current market price. It guarantees execution but not price — in fast markets, you may experience slippage (filling at a worse price than quoted). Market orders are appropriate when you need certainty of entry and are less sensitive to a few pips of slippage.
Limit Orders
A limit order fills only at your specified price or better. A buy limit below current price or a sell limit above current price. Limit orders guarantee price but not execution — if price does not reach your level, the order will not fill. Used by traders who want to enter at specific price levels (e.g., retest of support).
Stop Orders
A stop order (or stop-market order) becomes a market order when price reaches your trigger level. Buy stops are placed above the market (used to enter breakouts); sell stops are placed below the market. Stop loss orders are a specific use of this order type to exit losing positions.
Stop-Limit Orders
A combination of stop and limit — when the stop price is reached, a limit order is placed. This prevents slippage on the stop trigger but risks non-execution if price moves through the limit level too quickly. Less common for stop losses due to execution risk.
Execution Quality Matters
Slippage, requotes, and spread widening during news events are all forms of execution risk. ECN brokers with direct market access typically offer better execution than market makers — though this comes with commission rather than pure spread pricing. Know your broker's model before you trade.