Order types: market, limit, stop and trailing
An order is the instruction you give your broker: "buy/sell this, at this price, under these conditions". Picking the wrong type is a beginner mistake that costs money. Here are the four you need, with a clear map.
The mental map: better or worse price?
It all clicks with one idea: limit orders wait for a better price than now; stop orders trigger when price moves to worse (to enter on a breakout or to cut losses).
The four orders you need
| Order | What it does | When to use it |
|---|---|---|
| Market | Executes now, at the best available price right this moment. | When you must get in/out no matter what and immediacy matters more than the exact price. Mind the spread and slippage. |
| Limit | Waits for a better price and executes only if the market reaches it. | To enter "at a discount" (buy limit) or take profit at a target (sell limit / take-profit). |
| Stop | Activates when price crosses a level to the worse, becoming a market order. | As a stop-loss (cut losses) or to enter on a confirmed breakout (buy stop). |
| Trailing stop | A stop-loss that moves up (or down) following price in your favour, but never backwards. | To let a winner run while protecting gains without being glued to the screen. |
On the stop-loss: non-negotiable
The stop-loss isn't optional. It's the order that defines your maximum risk before emotions kick in. Without it, one trade going against you can eat the whole account. How much to risk and where to place it comes from your position size, and why it matters so much is in risk management.