Brokerage Orders, Explained

If you’re going to buy and sell stocks through a brokerage, you’ll need to understand the kinds of orders you can place. Below are the main ones:

• Market order: Place a market order when you want immediate execution of your trade. The most common type of order, it’s almost always filled, since no price is specified. If the stock soars or plunges unexpectedly, you might pay or receive an unexpected price, but that’s uncommon.

• Limit order: This is an order to buy or sell only at (or better than) a specified price (the “limit”). Use it if you have a maximum or minimum price at which you’re willing to trade. If you want to invest in a company but think its stock is too expensive, you can instruct your brokerage to buy only if it falls to or below your limit.

• Day order: Day orders expire at the end of the day, if they haven’t been filled yet.

• GTC (good till canceled) order: A GTC order stays in place until it’s executed or you cancel it — though your brokerage might cancel it after a few months.

• Stop order: A stop order becomes a market order once a stock reaches (or passes) a price that you choose. For example, you might place a stop order to sell certain shares if they fall below $25. The order takes place at the next available transaction price: If the shares close one day at $27 but then open the next morning at $22 due to bad news, your sale would happen at $22.

• Stop limit order: With a stop limit order, you specify a minimum sale price or maximum purchase price. So if you place a stop limit order to sell a stock at $60, and the stock falls to $60, the order becomes a limit order to sell your shares for no less than $60 apiece. If your price isn’t acceptable to the market, the transaction may not happen.