Traders can place four basic order types: market, limit, stop limit, and stop. Each features a unique functionality and purpose:
- Market orders are filled immediately at the best available price. They are used to rapidly enter or exit the market, but they may lead to unexpected slippage. Slippage is an unexpected change in prices and could result in the price being higher or lower than expected.
- Limit orders wait until they can be filled at a specific price or better. Limits are ideal for precise market entry or exit, but may go unfilled during periods of enhanced volatility.
- Stop orders are trades triggered by a certain “stop” price. These trades wait until that stop price is reached, after which a market order is triggered and are filled at the best available price. Like market orders, significant slippage can occur during periods of enhanced volatility.
- Stop limit orders combine features of stop and limit orders, as the name implies. These orders rest at market until triggered by a certain price, after which they are filled within a defined threshold. Stop limits offer precise market entry or exit above or below evolving price action. Amid challenging market conditions, Stop limit orders may go unfilled.
Also, traders can choose how long limit, stop, and stop limit orders are in effect. Traders can decide if orders are Good for Day (GFD) or Good Until Canceled (GTC), which means they expire at the end of the day or are left open indefinitely, respectively.
Find a full listing on futures and options order types by market group here.