Market Order Vs Limit Order Vs Stop Order | When To Use Which

If you are interested in buying or selling stocks or funds, there are few ways that most people use to determinate the price they will trade at. These are the market order, the limit order, and the stop orders.

In short, with market orders, you can trade the coins, or stock at the current market price. With the limit orders, you can place a price and when your stock reaches it, your order will be executed. A stop order will not be visible to the market until a price has been met and will activate the order.

These are the most crucial differences between them, and each of those can be more appropriate to use depending on the trading situation. Here are some recommendations you may consider before doing so.



This is the most basic and classic way to buy or sell trades. A market order is just the execution of an order. The most important thing here is the speed of completing the transaction.

Even though it might seem like a simple process, there is no guarantee that it will go through. Before doing a transaction, you need to take into consideration the liquidity of the stock, the size of the order, and the timing.

There is always the risk of market fluctuations that might occur between the time the broker receives the order and the time that is executed. Or it might be halted or suspended.



Limit orders gave people more control when they are buying or selling trades. The most important thing here is the price of the trade. The transaction won’t be completed until it reached the designated price.

Even in this method, there is no guarantee that the trade will go through. Because the stock might never reach the price. Or it hit your limit and there are not enough liquids to fill the order.



Stop orders are all based on a price that isn’t still available, but comes in 2 main variations. The stop loss and stop limit.

Stop Loss

Stop-loss, as the name suggests, is used to prevent investors from if below a certain price and stopping more potential loss.

The first case where it would make sense to use it is where you decide to buy a stock (for example, at $20) that is going up. For many reasons, the price might start dropping and if you have a stop loss at $18, it will turn into a market order and sell at the next available price, and you will get out with a minimum loss.

Another case to use it is to maximize your profit. For example, if the stock is going way up, but you think it might go down soon, so you put a stop loss at $25 to prevent losing out on the profit (if you bought it at $20, and now it’s at $28).

Stop limit

This order is a combination of the limit order and the stop loss. Typically, in this order, you are waiting for the price to go up to a certain price, and if it does, it will become a limit order and buy the stocks.

If you have bought the stock at $20, and it’s going up, you might put a stop at $30 and the limit at $28. So if the price drops below $30, it will trigger the limit to sell if the price will hit $28.



The biggest risk that limited orders or stop orders have is the stock never reaches the price between the time (3 months), and the order will not be executed. Or when it reaches the price, there isn’t enough liquidity to fill the order.

Limit orders and stop orders are much more complicated to execute than market orders. And it might cause higher brokerage fees as well.

Also, if you put your limit orders or stop orders outside the market hours, in that case, it will be placed into a queue for processing the transaction soon as the market opens.

1 thought on “Market Order Vs Limit Order Vs Stop Order | When To Use Which”

Leave a comment