Market order: an order to buy a stock at whatever price it is offered when the order is placed. It is the fastest, surest way to execute your trade. However, you may not get the best price. Your broker places the trade and you pay or receive the price the auction (market) determines. Investors should use caution in placing market orders. If the stock jumps in price you may end up paying a higher price, or selling at a lower price, than you intended.Limit order: You tell your broker the price at which you want to buy or sell. This eliminates the uncertainty of a market order. However, if the market price does not hit your target, you will not be able to buy or sell.
Stop Order: A stop order means you tell your broker to sell the shares if they fall to a specific price; it is used to protect your gains or limit your losses if the stock price drops. You can set the stop at a given price; then as a stock moves up you can have the broker increase the stop order price to protect the gain.
However, a stop order does not always work. If the market falls quickly, the price may drop so fast that it passes your market order price before your stock can be sold. If you set the stop price at $20.00 but the stock starts dropping to $20.25 then to $19.75 (skipping $20.00) the stock will not be sold.
Stop Limit Order: This type of order is filed at the market price like the Stop Order, but at a specific price. If the market moves too fast the broker may not be able to execute this type of order.
Day Order: These orders expire at the end of the day if they are not executed or canceled.
Fill or Kill Orders: This type of order is used with more sophisticated timing trades. The investor instructs the broker to buy or sell an investment at a specific price or better. If the investment cannot be bought or sold immediately, the order will be automatically canceled.
Week Order: These orders expire at the end of the week if they are not executed or canceled.
Good 'til Canceled Orders (GTC:) An open order that remains in effect until it is executed or canceled.
Specific Time Order: This type of order instructs the broker to execute the order at or by a specific time. Often this type of order is made "at or on the close," which means the last few minutes of a trading day.
Stop Order Dangers: Because of short-term fluctuations, investors are sometimes hurt by stop orders. An investor enters an order to "sell if the stock drops 10 percent." The stock drops 10 percent one day and he sells; then it goes back up 15 percent the next week. Thus he just lost 15 percent plus commissions. The Investors Alliance advocates finding good companies, buying them at low prices and holding on to them for the long term, or at least until they reach target sell prices.