Trading Order Types

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A variety of order types are available to you when trading stocks; some guarantee execution, others guarantee the price. This brief list describes popular types of trading orders and some of the trading terminology you need to know.

1. Market order

A market order is one that guarantees execution at the current market for the order given its priority in the trading queue (a.k.a., trading book) and the depth of the market. Buying stock is a bit like buying a car. With a car, you can pay the dealer’s sticker price and get the car. Or you can negotiate a price and refuse to finalize the deal unless the dealer meets your valuation. The stock market works similarly. A market order deals with the execution of the order. In other words, the price of the security is secondary to the speed of completing the trade. Limit orders, on the other hand, deal primarily with the price. So, if the security’s value is currently resting outside of the parameters set in the limit order, the transaction does not occur.

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