Order types and queue position

Every order type is a trade-off between certainty of execution and certainty of price. Understanding that trade-off is the foundation of execution.

The core order types

• Market order: executes immediately at the best available prices. Certain to fill in normal conditions; the price is not guaranteed.
• Limit order: executes only at the limit price or better. The price is controlled; the fill is not guaranteed.
• Stop order: becomes a market order once a trigger price trades. Commonly used to exit, and subject to slippage.
• Stop-limit order: becomes a limit order once triggered. Controls price, but may not fill at all in a fast move.
• Bracket and OCO orders: link a target and a stop so that when one fills, the other is cancelled.

Makers and takers

An order that rests on the book adds liquidity and is called a maker. An order that crosses the spread removes liquidity and is called a taker. Some venues charge different fees to each.

Queue position

Under price-time priority, a resting limit order joins the back of the queue at its price. Price can trade at that level and move away before the queue reaches you. This is why a limit order 'touched' on a chart is not proof that it would have filled, and why careful backtests require price to trade through a level before counting a limit fill.

Educational content only. Not financial advice.