Order types: market, limit, stop
Order type as a choice about what you fix
Every order fixes one thing and leaves the other to the market. A market order fixes execution and leaves price open. A limit order fixes price and leaves execution open. A stop order fixes the trigger level and leaves both the fill price and the fill itself open. That is the whole decision, and it is made before you click.
This matters because the two certainties cannot both be held at once. If you need the trade to happen, you accept whatever price the market gives. If you need a particular price, you accept that the trade may never happen. A screen that offers all three order types is not offering three chances at the same outcome; it is offering three different trade-offs.
On USD/INR, with one pip at ₹10 on one standard lot, the trade-off has a visible cost. A market order that fills 5 pips away from the screen price costs ₹50 more than the price you saw. A limit order that never fills costs nothing in cash but leaves the position unopened. Neither outcome is wrong in itself; one of them is wrong for your reason for trading.
What the broker does between your click and the fill
Your order does not go straight to a single price. It goes to the broker, who passes it on or takes the other side, and the price you receive is the price available at that moment. On a fast market that moment can be different from the moment you clicked. This is why a market order can fill away from the number on your screen.
The difference between the screen price and your fill is not a fee the broker invents. It is the market moving, plus the spread, plus any commission or markup the broker applies. These charges vary between brokers, and the same order on the same instrument can produce a different net cost at two different firms. The contract note is the record of what actually happened.
For limit and stop orders, the broker holds your instruction until the market reaches your level. A limit order waits for a better price and may wait indefinitely. A stop order waits for a worse price and then becomes a market order, so the fill can be away from the trigger. In both cases the level you set is a condition, not a promise of the price you will get.
Reading the order ticket before you confirm
An order ticket has fields that tell you what kind of order you are placing. The type field says market, limit or stop. The price field is active only for limit and stop orders. The quantity field is in lots, and on USD/INR one standard lot carries ₹10 per pip. Read all three before you confirm, because the type field decides which other fields matter.
A limit buy is placed below the current market and a limit sell above it. A stop buy is placed above the current market and a stop sell below it. If you enter a level on the wrong side, the platform will usually reject the order or warn you. That rejection is useful: it means the order would have triggered immediately, which is not what a waiting order is for.
The ticket also shows the current bid and ask. The bid is the price at which you can sell, the ask is the price at which you can buy, and the gap between them is the spread. A market buy fills near the ask, a market sell near the bid. A limit order fills only if the market reaches your price, and the spread still applies when it does.
One idea, three orders, three prices on USD/INR
| Step | Amount | Note |
|---|---|---|
| Current market price | 83.2500 | The price shown on the screen when the reader decides to buy. |
| Market order fill | 83.2500 | A market order takes the current price, so the fill is at or very near 83.2500. |
| Limit order price | 83.2300 | The reader sets a better buy price 20 pips below the market. It fills only if price falls there. |
| Stop order trigger | 83.2700 | The reader sets a worse buy price 20 pips above the market. It triggers only if price rises there. |
| Difference between market and limit | ₹200 | 20 pips on one standard lot, and 20 × ₹10 = ₹200. |
| Difference between market and stop | ₹200 | 20 pips on one standard lot, and 20 × ₹10 = ₹200. |
The broker may round the fill, charge a spread or commission on top, and quote a slightly different price from the one on your screen. These charges vary between brokers, so check the contract note for the exact figures.
Doing it once, step by step
The following steps walk through placing each order type on USD/INR in a practice account, using the prices from the lesson. Do them in order so you see how the ticket changes with each type.
- 01
Open the order ticket for USD/INR
Find USD/INR in the instrument list and open a new order ticket. Note the current bid and ask, around 83.2500. Do not confirm anything yet.
- 02
Place a market buy for one standard lot
Set the type to market, quantity to one standard lot, and confirm. Record the fill price. Compare it with the ask you saw. If the fill is 5 pips away, the extra cost is 5 × ₹10 = ₹50.
- 03
Place a limit buy 30 pips below the market
Set the type to limit, price to 83.2200, quantity to one standard lot, and confirm. The order waits. If it fills, the distance from the market at the time you placed it was 30 pips, worth 30 × ₹10 = ₹300 on one lot.
- 04
Place a stop buy 30 pips above the market
Set the type to stop, price to 83.2800, quantity to one standard lot, and confirm. The order triggers only if the market reaches 83.2800. The trigger distance was 30 pips, worth 30 × ₹10 = ₹300 on one lot.
- 05
Watch which orders fill and which wait
Leave the practice account open and observe. The market order is done. The limit and stop orders sit until the market moves to their levels. Note that the stop order, once triggered, becomes a market order and may fill away from 83.2800.
- 06
Check the contract note for the actual figures
After any fill, open the contract note and find the price you received, the spread, and any commission. These vary between brokers, so the note is the only reliable record. Use it to compare what you expected with what the trade cost.
The mistake most people make here
The common mistake is to use a market order when the reader actually wants a specific price, or to use a limit order when the reader needs the trade to happen no matter what. A market order can fill away from the price you saw, and a limit order can sit unfilled forever while the market moves without you. A stop order is not a safety net for a better price; it triggers at a worse price once the market reaches your level. Decide first whether you need certainty of execution or certainty of price, then pick the order type that matches.Check yourself
You place a limit buy on USD/INR at 83.2200 when the market is 83.2500. How many pips below the market is your order, and what is that worth on one standard lot?
83.2500 minus 83.2200 is 30 pips. On one standard lot, 30 × ₹10 = ₹300.
You place a stop buy at 83.2800 when the market is 83.2500. How many pips above the market is the trigger, and what is that worth on one standard lot?
83.2800 minus 83.2500 is 30 pips. On one standard lot, 30 × ₹10 = ₹300.
A market order fills at 83.2550 instead of the 83.2500 you saw. How much did the 5 pip difference cost on one standard lot?
5 pips × ₹10 = ₹50. That is the extra amount paid because the fill was 5 pips away from the screen price.
Questions that come up next
If a limit order never fills, is my money held somewhere?
No cash leaves your account when you place a limit order. The instruction sits with the broker until the market reaches your level or you cancel it. What is tied up is your attention and your plan, not your rupees. If you forget the order, it can still fill weeks later when the price returns. Cancel orders you no longer want.
Why did my stop order fill at a price that was not my trigger?
A stop order is a condition, not a price. When the market reaches your level, the order becomes a market order and takes the next available price. On a fast move that next price can be several pips away from the trigger. The gap between trigger and fill is normal, not an error.
Can I change a market order into a limit order after I click?
Not on the same order. Once a market order is filled, the trade exists and you can only close it with a new order. If you wanted a specific price, you had to choose a limit order before clicking. This is why the choice is made first and the click comes second.
How do I know what my fill actually cost?
The contract note shows the price you received and any commission or charges on top. Compare that fill price with the price you saw on screen when you clicked. The difference is the slippage plus costs for that trade. These charges vary between brokers, so read the note rather than assuming a figure.
Does the spread affect all three order types the same way?
The spread is present in every fill, but it bites differently. A market order pays it immediately. A limit order only fills at your price or better, so the spread is already inside your level. A stop order turns into a market order and pays the spread at that moment. The cost is real in all three cases.
What happens to a stop order if the market jumps straight past my level?
The order triggers and becomes a market order at the next available price. That price can be beyond your level, sometimes well beyond on a gap. You get execution, but not at the trigger number. This is the trade-off you accepted when you chose a stop instead of a limit.
The words used on this page
- Market order
- An instruction to trade at whatever price is available right now. It fixes execution and leaves the price open. The fill can differ from the number on your screen.
- Limit order
- An instruction to trade only at your chosen price or better. It fixes the price and leaves execution open. It may never fill.
- Stop order
- An instruction that waits for the market to reach a set level, then becomes a market order. It fixes the trigger, not the fill price. The fill can be worse than the trigger.
- Slippage
- The gap between the price you saw and the price you received. It happens because the market moves between your click and the fill. On USD/INR, 5 pips of slippage is ₹50 on one standard lot.
- Contract note
- The record your broker sends after a trade, showing the fill price and the charges applied. It is the document that tells you what actually happened. Figures vary between brokers.
- Spread
- The difference between the buying price and the selling price quoted at the same moment. Every fill crosses it in some form. It is one of the costs built into the price you receive.
What to take away
- Every order fixes one thing and leaves the other to the market: market orders fix execution, limit orders fix price, stop orders fix only the trigger.
- On USD/INR, one pip is ₹10 on one standard lot, so a 30 pip gap between your level and the market is ₹300 of distance.
- A market order that fills 5 pips from your screen price costs ₹50 more on one lot, and that figure is slippage, not a fee invented by the broker.
- Check the contract note for the real fill and the real charges, because these vary between brokers.