What is a "market order"?

When you purchase a stock, you may request your broker or online brokerage interface to enter a market order. A market order is an order to purchase or sell a stock at the best available price. Even if the order is executed immediately, it does not necessarily mean that you will get the last traded price, as prices change every second, and the price you receive may be quite different from the price you originally wanted.

Why is there a difference in price from the time that I want to buy or sell a stock and the time that I actually buy or sell that stock?

When you call a broker or click the "execute" button on an online interface, your trade ultimately goes to an intermediary, who must determine to which market to send the order. The stock orders may or may not be packaged together with many other orders to be fulfilled at the most favorable price. According to the SEC, there

A lot of people still picture stockbrokers shouting out orders to buy or sell stock, but these days computer transactions make the process a lot more quiet.

A lot of people still picture stockbrokers shouting out orders to buy or sell stock, but these days computer transactions make the process a lot more quiet.

are no current regulations making brokerage firms execute trades within a certain time, only that the firm cannot deceptively advertise its ability to trade, and must meet its promises to its clients.

What is a "limit order"?

A limit order allows an investor to buy or sell a stock at a specific price. If the limit order is a "buy" limit order, it may be executed at the stipulated price or better. If the limit order is a "sell" limit order, the brokerage firm or site must execute this trade at the limit price or higher, so that the client receives the most money in exchange for his shares at the time of order execution.

Why are limit orders good to use?

For investors who are buying or selling positions, limit orders help ensure that the investor is getting the best price for his transaction, and does not pay more or sell for less than a predetermined amount. Limit orders provide investors with some protection against volatile price movements of securities while trades are moving through various electronic systems. Limit orders may be more expensive to execute than market orders, so experts generally assert to check with your brokerage firm regarding its fees.

 
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