An order or trade order is a client’s instruction to their brokerage firm to buy or sell a financial asset on their behalf. Orders are usually placed through an online [trading platform] such as CFI’s MetaTrader 5 trading platform.
The two major types of orders that every investor should familiarise themselves with are the market order and the limit order.
A market order is a request a trader sends to their broker to instruct them to execute a trade at that exact moment and the best possible price. Market orders are usually executed in seconds or even milliseconds, provided there is a liquid market at the given moment the order has been placed. When a market order has been completed, it is known as a ‘filled order’.
A limit order is another order type traders must be familiar with before starting to trade on a live account. This type of order is also referred to as a pending order which allows traders to buy and sell financial assets at a fixed price in the future. For example, if you decide to buy gold at $1,700, you could enter a limit order for this amount. This means that you would not pay more than $1,700 for that particular asset. Bear in mind, that it is still possible for you to buy the asset for less than $1,700 if you wish to do so.
Digging deeper there are four types of limit orders:
- Buy limit: an order sent from a trader to their broker to purchase an asset below the current price
- Sell limit: an order sent from a trader to their broker to sell an asset above the current price
- Buy stop: an order sent from a trader to their broker to buy an asset at a price above the current market price
- Sell stop: an order sent from a trader to their broker to sell an asset at a price below the current market price
- An order is a request from a trader to a broker to buy or sell an asset on behalf of the trader
- Orders include market orders which are executed at market price or pending orders