Lesson 4 of 6 · 10 min
Order types: market, limit and stop
How you place an order matters as much as what you buy.
A market order buys or sells immediately at the best available price. It guarantees a fill, not a price.
A limit order sets the maximum you'll pay (or minimum you'll accept). It guarantees the price, not the fill.
A stop-loss order becomes a sell order once price falls to a level you choose. It's a tool to limit losses, though in a fast drop the fill can be below your stop.
Diagram
Trade example · SPY (S&P 500 ETF)
Entering with a limit, protecting with a stop
SPY trades at $520. The investor would rather buy a little lower and define their risk up front.
- Limit buy
- 4 shares at $515.00
- Filled
- $2,060.00 total
- Stop-loss placed
- $489.25 (−5%)
- Maximum planned loss
- ≈ $103 (before slippage)
- Price later
- $545.00 → position worth $2,180 (+$120)
The limit order saved $20 on entry, and the stop defined the worst-case plan before any money was at risk.
Decide your exit before you enter.
Prices are rounded examples for teaching, not live quotes or recommendations to buy or sell.
Key takeaways
- Market = speed. Limit = price control.
- Stops can limit losses but may slip in fast markets.
- Plan the exit before the entry.
Knowledge check
Which order guarantees your price but not that it fills?
DisclaimerMoor Capital provides financial education and informational tools. Content is not individualized investment, legal, tax, credit-repair, or financial advice. Investing involves risk, including possible loss of principal.