Stock Order Types Explained: Market, Limit, Stop, and More

Knowing how to place a stock order seems simple until you see the options: market, limit, stop, stop-limit, trailing stop, GTC, AON, IOC...

Using the wrong order type can cost you money through bad execution, missed trades, or unintended sales. Using the right one can save you money and protect your portfolio.

This guide explains every order type you'll encounter, when to use each, and common mistakes to avoid.

The Basics: How Stock Orders Work

When you want to buy or sell a stock, you submit an order to your broker. Your broker routes it to an exchange or market maker for execution.

Every order has:

• Action: Buy or sell
• Quantity: How many shares
• Symbol: Which stock
• Order type: How to execute (market, limit, etc.)
• Duration: How long the order stays active

The order type determines when and at what price your order executes.

Market Orders

What It Is

A market order executes immediately at the best available price.

Buy market order: You get shares at the lowest price someone is willing to sell

Sell market order: You sell shares at the highest price someone is willing to pay

How It Works

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You place: Buy 100 shares of AAPL at market
Current ask: $185.50
Result: You buy 100 shares at ~$185.50 (or close to it)

Pros and Cons

When to Use Market Orders

Good for:

• Liquid stocks (high volume, tight spreads)
• When you need to get in or out immediately
• Small orders in actively traded stocks
• When current price is acceptable

Avoid for:

• Illiquid stocks (wide bid-ask spreads)
• Volatile markets (prices moving fast)
• Large orders (may move the market)
• Pre-market or after-hours trading
• Stocks with recent news (prices swinging wildly)

Market Order Risks

Slippage: The difference between expected price and actual fill price.

Example of slippage:

• You see AAPL at $185.50
• Place market buy order
• By the time it executes: $185.75
• Slippage: $0.25 per share

In liquid stocks, slippage is usually pennies. In illiquid or volatile stocks, it can be dollars.

Worst case scenario:

• Illiquid stock shows $10.00 bid / $10.50 ask
• You place market buy for 1,000 shares
• Only 100 shares available at $10.50
• Next 500 shares at $11.00
• Final 400 shares at $11.50
• Average price: $10.95 instead of $10.50

Limit Orders

What It Is

A limit order only executes at your specified price or better.

Buy limit: Buy at this price or lower Sell limit: Sell at this price or higher

How It Works

code-highlight
Stock trading at: $50.00
You place: Buy limit 100 shares at $48.00

Scenario A: Stock drops to $48.00
Result: Order fills at $48.00 or better

Scenario B: Stock never drops to $48.00
Result: Order never fills

Pros and Cons

When to Use Limit Orders

Good for:

• Setting specific entry/exit prices
• Illiquid stocks
• Volatile markets
• Large orders
• Pre-market and after-hours trading
• When you're patient and price-sensitive

Example uses:

• "I'll buy if it drops to support at $45"
• "I want to sell at my target of $60"
• "I'll only buy below yesterday's close"

Limit Order Strategies

Buy limit below market:

• Set limit below current price
• Wait for pullback
• Get better entry or no fill

Sell limit above market:

• Set limit at your target price
• Automatically sells when target hit
• Take profits systematically

Buy limit at market:

• Set limit at or slightly above current ask
• Gets you filled like a market order
• But protects against sudden price spikes

Stop Orders (Stop-Loss)

What It Is

A stop order becomes a market order when the stock reaches your stop price.

Sell stop (stop-loss): Sells when price drops to your stop Buy stop: Buys when price rises to your stop

How It Works

code-highlight
You own stock at: $100
You set: Sell stop at $90

Scenario A: Stock drops to $90
Result: Stop triggers, becomes market order, sells at ~$90

Scenario B: Stock rises to $120
Result: Stop never triggers, you keep shares

Scenario C: Stock gaps down to $85 overnight
Result: Stop triggers at open, sells at ~$85 (not $90)

Sell Stop (Stop-Loss) Orders

The most common use: protecting against losses.

Example:

• Buy MSFT at $400
• Set stop-loss at $360 (10% below purchase)
• If MSFT drops to $360, automatic sell
• Maximum loss: 10% (plus any gap)

Where to set stop-losses:

Buy Stop Orders

Less common but useful for:

Breakout trading:

• Stock consolidating at $50
• Resistance at $52
• Set buy stop at $52.10
• Only buy if breakout happens

Short covering:

• You're short a stock at $100
• Set buy stop at $110 to limit losses
• Automatically covers if stock rises against you

Stop Order Risks

Gap risk: If stock gaps past your stop, you sell at the gap price, not your stop price.

Example:

• Stop-loss set at $90
• Bad news overnight
• Stock opens at $80
• You sell at $80, not $90

Stop hunting: Some traders believe large players push prices to trigger stops before reversing. Controversial, but worth considering when setting stop levels.

Whipsaws: In volatile markets, stops trigger on temporary dips, then the stock recovers without you.

Stop-Limit Orders

What It Is

A stop-limit order becomes a limit order (not market order) when the stop price is reached.

You set two prices:

1. Stop price: When to activate the order
2. Limit price: The worst price you'll accept

How It Works

code-highlight
You own stock at: $100
You set: Sell stop-limit, stop at $90, limit at $88

Scenario A: Stock drops to $90, trades at $89
Result: Stop triggers, limit order at $88 placed, fills at $89

Scenario B: Stock gaps down to $85
Result: Stop triggers, limit order at $88 placed, doesn't fill (price below limit)

Scenario C: Stock never drops to $90
Result: Nothing happens

Stop-Limit vs Stop-Loss

When to Use Stop-Limit

Use stop-limit when:

• You'd rather not sell than sell at a terrible price
• Stock is illiquid (wide spreads)
• You're worried about gaps but want some protection

Use stop-loss when:

• You must exit no matter what
• Stock is liquid (tight spreads)
• Gap risk is acceptable

Setting Stop and Limit Prices

Typical approach:

• Stop price: Where you want to exit
• Limit price: 1-2% below stop price

Example:

• Stop: $90.00
• Limit: $88.00
• Gives $2 cushion for execution

Too tight (limit = stop): May not fill in fast markets Too wide: Defeats purpose of price protection

Trailing Stop Orders

What It Is

A trailing stop automatically adjusts your stop price as the stock moves in your favor.

Set as:

• Dollar amount (e.g., $5 below market)
• Percentage (e.g., 10% below market)

How It Works

code-highlight
Buy stock at: $100
Set trailing stop: $10 (or 10%)
Initial stop price: $90

Stock rises to $110:
New stop price: $100 (locks in breakeven)

Stock rises to $130:
New stop price: $120 (locks in $20 profit)

Stock drops from $130 to $120:
Stop triggers, sell at ~$120

Key point: Trailing stops only move UP (for long positions). They never move down.

Trailing Stop Example

Result: Bought at $100, sold at $110, captured $10 gain while allowing for pullbacks.

Trailing Stop Strategies

Tight trailing stop (3-5%):

• Locks in gains quickly
• Gets stopped out on normal volatility
• Good for momentum trades

Wide trailing stop (15-20%):

• Allows for larger swings
• Stays in longer trends
• May give back more profit

ATR-based trailing stop:

• Use 2-3× Average True Range
• Adjusts for stock's volatility
• Tighter for calm stocks, wider for volatile

Trailing Stop-Limit

Some brokers offer trailing stop-limit orders:

• Trailing stop that becomes a limit order
• Combines trailing with price protection
• Same trade-offs as stop vs stop-limit

Order Duration: Day vs GTC

Day Orders

What it is: Order expires at market close if not filled.

Default for most brokers.

Use when:

• You want to reassess daily
• Order is tied to today's conditions
• You don't want forgotten orders filling later

GTC (Good-Til-Canceled)

What it is: Order stays active until filled or canceled (typically 60-90 days, varies by broker).

Use when:

• Setting limit orders at target prices
• You're patient and willing to wait
• You have a specific price in mind

Warning: Review GTC orders periodically. Conditions change, and you may not want to buy/sell at old prices.

Other Duration Types

Advanced Order Types

All-or-None (AON)

What it is: Order fills completely or not at all.

Example:

• You want exactly 1,000 shares
• Only 500 available at your limit
• AON: Order doesn't fill (waits for 1,000)
• Without AON: You get 500 shares (partial fill)

Use when:

• You need specific share count
• Partial fills cause problems
• Commission structures favor full fills

Downside: Harder to fill, especially for large orders

Fill-or-Kill (FOK)

What it is: Fill entire order immediately or cancel it completely.

Like AON but:

• Must fill instantly
• No waiting
• Immediate execution or nothing

Use when:

• You need it now and all of it
• Fast-moving situations
• No patience for partial fills

Immediate-or-Cancel (IOC)

What it is: Fill whatever you can immediately, cancel the rest.

Example:

• You want 1,000 shares at $50
• 600 available at $50
• IOC: You get 600 shares, remaining 400 canceled
• Regular order: 600 fills, 400 remains open

Use when:

• You want what's available now
• Don't want unfilled portion lingering
• Partial fills are acceptable

One-Cancels-Other (OCO)

What it is: Two orders linked together — when one fills, the other cancels.

Example:

• You own stock at $100
• Set sell limit at $120 (take profit)
• Set sell stop at $90 (stop loss)
• Whichever triggers first, the other cancels

Use when:

• You want profit target AND stop loss
• Bracketing a position
• "Either this happens or that happens"

Bracket Orders

What it is: Entry order plus automatic profit target and stop loss.

Example:

• Buy 100 shares at market
• Automatically sets sell limit at $110 (profit)
• Automatically sets sell stop at $90 (loss)
• When entry fills, both exit orders activate (OCO)

Use when:

• You have clear profit target and stop loss
• Want automation
• Entering new positions

Order Types Summary Table

Common Order Type Mistakes

Mistake 1: Market Orders in Illiquid Stocks

Problem: Wide bid-ask spreads cause terrible fills.

Example:

• Stock shows $10.00 bid / $12.00 ask
• Market buy fills at $12.00
• You're instantly down 20%

Fix: Always use limit orders for illiquid stocks.

Mistake 2: Stops Too Tight

Problem: Normal volatility triggers your stop, then stock recovers.

Example:

• Buy at $100, stop at $98 (2%)
• Stock dips to $97.50 on normal fluctuation
• You're sold out
• Stock rebounds to $110

Fix: Set stops based on volatility (ATR) or support levels, not arbitrary percentages.

Mistake 3: Stops Too Obvious

Problem: Placing stops at round numbers or obvious support where everyone else does.

Example:

• Support at $50
• Everyone sets stops at $49.90
• Stock dips to $49.85, triggers all stops
• Stock rebounds

Fix: Set stops slightly below obvious levels (e.g., $49.25 instead of $49.90).

Mistake 4: Forgetting GTC Orders

Problem: Old GTC orders fill when you've forgotten about them.

Example:

• Set GTC limit buy at $40 months ago
• Forgot about it
• Stock crashes to $40 on bad news
• Order fills, but you wouldn't buy anymore

Fix: Review GTC orders monthly. Cancel outdated ones.

Mistake 5: Stop-Limit Too Tight

Problem: Limit price too close to stop price, order doesn't fill in fast market.

Example:

• Stop at $50.00, limit at $49.90
• Stock gaps down to $49.50
• Order triggers but doesn't fill (below limit)
• Stock continues to $40, you're still holding

Fix: Set limit 2-3% below stop to allow execution room.

Mistake 6: Not Using Stops at All

Problem: Small loss becomes catastrophic loss.

Example:

• Buy at $100, no stop
• Stock drops to $80, you hold hoping for recovery
• Stock drops to $50
• Now down 50% instead of planned 10%

Fix: Always have an exit plan. Use stops or mental stops with discipline.

Order Type Strategies by Situation

Entering a New Position

If you want in now (liquid stock):

• Market order (simple, immediate)
• Or limit order at ask price (protects against spike)

If you want a better price:

• Limit order below current price
• Be patient, may not fill

If you want to buy on breakout:

• Buy stop above resistance
• Only triggers if breakout happens

Protecting an Existing Position

Basic protection:

• Stop-loss order 7-15% below entry
• Guarantees exit, accepts gap risk

Price-sensitive protection:

• Stop-limit order
• Won't sell below limit, but may not sell at all

Locking in gains:

• Trailing stop follows price up
• Protects profits, allows continued upside

Taking Profits

At specific target:

• Sell limit at target price
• Automatic execution when reached

Scaling out:

• Sell limit for half at Target 1
• Sell limit for half at Target 2
• Or trailing stop after first target

Complete exit strategy:

• OCO order with limit (profit) and stop (loss)
• Automatically handles either outcome

After-Hours and Pre-Market

Required: Limit orders only (market orders not accepted)

Consider:

• Wider spreads (less liquidity)
• More volatility
• Set limits carefully

Order Types by Trading Style

Day Traders

Common order types:

• Market orders for quick entries/exits
• Limit orders for specific prices
• Bracket orders for automatic profit/stop
• Hotkeys for speed

Key concern: Execution speed

Swing Traders

Common order types:

• Limit orders for entries on pullbacks
• Stop-losses for overnight protection
• Trailing stops to ride trends
• GTC orders for patient entries

Key concern: Price and protection

Long-Term Investors

Common order types:

• Limit orders for value entries
• Wide stop-losses (if any)
• GTC orders at target prices

Key concern: Entry price, less about short-term execution

Quick Reference: Order Type Cheat Sheet

Which Order to Use

Order Duration Guide

Stop Placement Guide

Setting Price Alerts

Rather than guessing when to place orders, use price alerts to notify you when stocks reach important levels.

Alert ideas:

• Price approaching your buy target
• Price hitting stop-loss level (to manually review)
• Breakout above resistance
• Breakdown below support

With Stock Alarm:

• Set alerts for any price level
• Get notified instantly
• Then decide whether to act
• Combines automation with control

Frequently Asked Questions

What is the difference between a market order and a limit order?

A market order executes immediately at the best available price, guaranteeing execution but not price. A limit order only executes at your specified price or better, guaranteeing price but not execution. Use market orders when speed matters, limit orders when price matters.

What is a stop-loss order and how does it work?

A stop-loss order automatically sells your stock when it drops to a specified price, limiting your losses. When the stop price is reached, it becomes a market order and sells at the next available price. Example: Buy stock at $100, set stop-loss at $90 to limit loss to 10%.

What is a trailing stop order?

A trailing stop automatically adjusts your stop price as the stock moves in your favor. Set as a dollar amount or percentage below the market price. If stock rises from $100 to $120 with a $10 trailing stop, your stop rises from $90 to $110, locking in gains while allowing upside.

Should I use a stop-loss or stop-limit order?

Stop-loss orders guarantee execution but not price (may sell lower than stop in fast markets). Stop-limit orders guarantee price but not execution (may not fill if price gaps through). Use stop-loss for protection in liquid stocks, stop-limit when you'd rather not sell than sell at a bad price.

What does GTC mean for stock orders?

GTC (Good-Til-Canceled) means your order stays active until it executes or you cancel it, typically up to 60-90 days depending on your broker. Day orders expire at market close if unfilled. Use GTC for limit orders at target prices you're willing to wait for.

Related Articles

Master your trading execution:

• Trading Risk Management — Position sizing and protecting your capital
• How to Read Stock Charts — Identify entry and exit points
• Volume Analysis Guide — Confirm moves before executing orders
• Short Selling Guide — Order types for shorting stocks
• Day Trading Strategies — Intraday order execution tactics