from schwab.com
A market order is an order to buy or sell a stock at the best available price. Keep in mind that a market order guarantees execution but does not guarantee a particular price.
A limit order is an order to buy or sell a stock at a specified price or better. It guarantees a price but doesn't guarantee execution. A limit order might make sense if:
- You're buying and want a lower price, because a limit order allows you to specify a price below the current market price.
- You're selling and want a higher price, because a limit order allows you to specify a price above the current market price.
A stop order is an order to buy or sell once the price of a stock reaches a specified price. It's often referred to as a "stop-loss" order. In this context, the stop order to sell is triggered when the specified price is reached and becomes a market order executed on the next trade.
However, a stop order may be used as a buy order as well. In this case, the trader identifies a specific price that will trigger a purchase of the stock, in essence "stopping" the stock from getting away. This type of order may be useful to a trader trying to identify a point at which a stock's price trend changes from down to up.
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