What you have learnt
The two main order types are: market orders and limit orders
- A market order is an order to buy or sell a stock at the market’s current best available price.
- A limit order is an order to buy or sell a stock with a restriction on the maximum price to be paid or the minimum price to be received.
- You may have your preference of order type. However, in order to decide which suits best in different situations, you should know the characteristics of both order types.
- The main risk of a market order is that the outcome of the price can be significantly different than you expected.
- The risk of a limit order is that the order won’t be executed.
- A stop-loss order enables you to define the level where a position must be closed to prevent losses to become too big.