investing guide

Market Orders vs. Limit Orders

When you buy stocks there are basically two types of orders that can be placed with your broker.

The first and most common type of orders are called Market Orders. This type of order is the quickest way to place an order in the stock market. It simply means you are accepting whatever the current price of that stock is in exchange to have your order filled immediately.

The second type of orders are known as Limit Orders. This type of order allows the buyer to get the stock they are interested in at the price they are willing to pay. So lets say a stock is currently selling at $20.00 a share, and you feel it is only worth it to buy it when it drops to $18.00 a share. Therefore, you would submit a limit order and if the stock drops down to $18.00 dollars a share your order is then filled. If the stock never drops down to $18.00 then your order is never filled.

One other important aspect of a Limit Order is the choice of good-till-canceled, also called GTC, or the day order option. What this basically means is you have the option of waiting for your limit order to be filled just for the day you placed the limit order, or you can leave it going indefinitely until it gets filled or you cancel the order.

So to keep it simple a Market Order fills your order instantly for the current price, while a Limit Order allows you to control what you are willing to pay for a stock.