Market Order
A market order is a basic instruction to a broker to buy or sell at the prevailing market price. It is used when speed is essential, such as in fast-moving markets. However, market orders may be prone to slippage, where orders are filled at different prices, which may not be favorable.
Limit Order
A limit order allows the trader to specify the price at which they want to buy or sell. The order will only be filled if the price is better than what is specified. It provides greater control over execution prices and helps avoid unfavorable price slippages.
Stop Order
A stop order is used to exit a position when the price reaches a predetermined level, also known as a stop loss order. It removes the psychological hesitation to exit a position and is essential for survival in day trading. It becomes a market order when the price hits the stop level, helping to minimize losses.
Stop Limit Order
A stop limit order is similar to a stop loss order, but it becomes a limit order at the predetermined price. This helps to ensure that the trader gets a fill at a price they specify or better, helping to avoid unfavorable price movements.
