“A stop order guarantees execution at the stop price.”
Not quite.A stop typically becomes executable after its trigger and may fill at a materially different price in a fast market.
Foundations
Order Types (Market, Limit, Stop)
Order types express your priority: do you care more about being filled, or about the price you pay?
Mental model
An order type states whether execution certainty or price control has priority.
Market orders say “fill me now” and sacrifice price certainty for execution certainty — you trade immediately at the best available prices.
Limit orders specify a worst acceptable price; they protect you from bad prices but may never execute if the market does not reach your limit.
Explore the mechanism
What trade-off does each order make between execution certainty and price control?
This diagram shows a short price path over time with bid/ask band. Choose an order type to see when it fills and how much slippage vs mid you incur.
Status: filled
Execution outcome
Limit buy: filled when market traded down to your limit at step 4.
Fill price: 99.6000
Time to fill (steps): 4
Slippage vs reference (bps): 10.1
Interpretation
Market orders sit on the execution certainty end of the spectrum: you always trade now, but you pay the full spread and whatever the book offers in fast moves.
Limit orders move towards price control: you only trade if the market comes to you. Stops are about controlling risk; with gap risk on, you see how a stop-loss can trigger at one level and be filled much worse in a discontinuous market.
Order-type trade-off(execution certainty · price control · risk control)
The highlighted corner shows where the chosen order type leans: market towards execution certainty, limit towards price control, and stop towards risk control. Real execution policies mix these, just like a controller trades off speed, overshoot, and robustness.
UNDERSTAND
What to notice
Stop orders activate when a trigger level is hit, then behave like market or limit orders; they are often used as safety brakes to cut losses.
Control analogy: order choice is like choosing between fast but noisy control actions (market) versus slower, more precise ones (limit) under constraints.
Where it appears
- placing exchange orders
- designing execution algorithms
- controlling slippage in fast markets
Where the intuition breaks
What this view leaves out
- An order type controls instructions, not outcomes: liquidity, queue position, gaps, venue rules, and latency still determine execution.
Common mistakes
Where this concept sits
Follow the strongest prerequisites, applications, extensions, and contrasts.
Connections for Order Types (Market, Limit, Stop)
Order Types (Market, Limit, Stop)YOU ARE HERE
Used byOptimal Execution as Stochastic ControlExecution policies are ultimately expressed through market, limit or other order instructions.
UsesBid–Ask SpreadMarket and limit orders interact directly with quoted bid–ask prices and available liquidity.
Supported byLatency, Event-Driven Systems, and Kill-Switch DesignEvent-driven execution systems must process orders and cancellations reliably under latency and risk-control constraints.
Used by · Optimal Execution as Stochastic Control
Execution policies are ultimately expressed through market, limit or other order instructions.
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