Market, limit and stop orders: how each order type works

What an order is

An order is an instruction you send to your broker: buy or sell, how many contracts, and how. The order type is the “how”. It decides two things: when the order can trade, and at what price.

When an order trades, it’s called a fill. Placing an order and getting a fill aren’t the same thing. Some orders fill at once, some wait, and some never fill.

Market order: trade now

A market order says: fill me now, at the best price available. A market buy trades with the sellers waiting at the ask. A market sell trades with the buyers waiting at the bid. Read about bid, ask and spread.

What it promises: it fills, as long as there are orders on the other side.

What it doesn’t promise: the price. In a fast market, or when your order is bigger than what’s waiting at the best price, it can fill worse than the price you saw. That difference is called slippage.

Limit order: only at my price or better

A limit order sets the worst price you’ll accept. A buy limit fills at its price or lower. A sell limit fills at its price or higher. You place a buy limit below the current price and a sell limit above it.

What it promises: it never fills worse than your price.

What it doesn’t promise: a fill. If price never reaches your limit, nothing happens. If price only touches it, you may still miss out. Orders at each price wait in a queue, first come first served, and there may not be enough selling at that price to reach yours. When price trades through your limit, it fills.

Stop order: wait for a trigger, then trade

A stop order does nothing until price reaches its trigger, called the stop price. Then it becomes a market order. A buy stop sits above the current price. A sell stop sits below it.

That’s the opposite side to a limit. A buy limit waits for a lower price. A buy stop waits for a higher one. Traders use stops to get out of a trade that has moved against them (a stop loss), or to get in once price moves through a level.

What it promises: it waits until your trigger, then tries to fill.

What it doesn’t promise: your stop price. Once triggered, it fills where the market is. In a fast move, or when the market opens beyond it, that can be well past your price.

Stop-market vs stop-limit

There are two kinds of stop. A stop-market order becomes a market order when triggered. It fills, but the price isn’t promised. A stop-limit order becomes a limit order when triggered. The price is promised, but a fill isn’t.

Both pictures show the same move. The market opens at 92, below a sell stop at 94. The stop-market sells at 92, two points past the trigger. The stop-limit, with its limit at 93.50, can’t sell below 93.50, so it waits unfilled while price keeps falling. If it was meant to close a trade, that trade is still open.

On CME Globex, where many US futures trade, market orders and stops that turn into market orders are given protection. They can only fill within a set distance of the price when they were sent, and any part that can’t fill there waits as a limit order. Your broker’s platform shows which order types it supports.

Where each order sits

A simple way to remember it: limits wait for a better price, so a buy limit sits below and a sell limit above. Stops wait for price to move through, so a buy stop sits above and a sell stop below.

Put an order on the wrong side and it acts at once. A buy limit placed above the current price fills straight away, much like a market order, and a buy stop placed below it is refused or triggers at once, depending on the platform.

Other order types you’ll see

• Bracket order (OCO). An entry sent with a stop and a target attached. When one of the two exits fills, the other is cancelled: one cancels the other. Read about bracket orders.
• Trailing stop. A stop that follows price as it moves your way, keeping the same distance, and never moves back.
• Day and good-till-cancelled. How long an order waits. A day order is cancelled at the end of the session. A good-till-cancelled order waits until it fills or you cancel it.

Often confused with

Stop order vs stop loss. A stop loss is a job, not an order type. It’s the exit that closes a losing trade, and it’s usually placed as a stop order. Read about stop losses.

Limit order vs take profit. A take profit is the exit that closes a winning trade. It’s usually placed as a limit order. Read about take profit.

Buy stop vs buy limit. Both wait. A buy limit waits for price to fall to it. A buy stop waits for price to rise to it.

Order types in a backtest

Test how your strategy gets in and out

When you backtest a strategy in Wildflower, you choose how each trade gets in: at market, with a limit order, or with a stop order waiting at a level. Every trade is drawn on the chart with its entry, stop and target. Every result says what it assumed about each fill: a limit never fills worse than its price, and a stop fills where the market is once it triggers. No coding needed.

Set it up and see how it works, free. Only pay when you backtest on real market history.

Join waitlistSee the Backtest

Common questions

Related

• Bid, ask and spread
• Stop loss
• Risk to reward
• Glossary

In the help centre

• Entries, exits and trade protection
• Fill assumptions on a backtest result