65-Day Academy · Day 3 · Foundations
Market, Limit, Stop, Stop-Limit
Market order
"Buy now at whatever the current price is." Guaranteed execution, never guaranteed price. In liquid mega-caps during normal hours, the difference is pennies. In thin stocks, at the open, or during crashes, a market order can fill dramatically worse than the price you saw. The 2010 Flash Crash filled some market sell orders at $0.01.
Limit order
"Buy only at my price or better." Guaranteed price, never guaranteed execution. If you limit-buy at $99 and the stock gaps to $101 on news, you simply don't get filled — which is sometimes exactly what you wanted. Limits protect you from chaos; they cost you the trades that run away.
Stop and stop-limit
A stop becomes a market order when price touches your trigger (stop-loss). A stop-limit becomes a LIMIT order at your limit price when triggered — safer against horrible fills, but it may never execute at all in a fast crash, leaving you holding the falling knife. Classic mistake: stop-limit with limit too close to stop in a gapping stock = no protection.
What you'll practise
You own a stock at $100 and want protection against a crash overnight. Which are true about using a stop order at $95? (Select all that apply)
20 XP in the app · intermediate
Sources
- Stop Order vs Stop-LimitInvestopedia
- Flash Crash 2010SEC / CFTC joint report
Take this lesson graded in the app →
All lessons are for educational purposes only and are not individualized financial advice, a recommendation, or a solicitation to buy or sell any security. Options involve substantial risk and are not suitable for every investor.