SIE Ready⚡ Trading & Settlement · Lesson 1 of 6 · 5 min
Market, Limit, Stop: Which Order Does What
🎛️ Two customers both say 'sell my stock if it hits $40.' One wants protection, the other wants a target price. They need opposite orders.
💡 Key idea
Limits protect price, stops trigger a market order. BLiSS: Buy Limit and Sell Stop go below the current market.
🧠 Why it matters
A MARKET order executes right away at the best available price: speed, but no price promise. A LIMIT order sets the worst price you accept (buy at or below, sell at or above): price, but no promise of execution. A STOP order sits idle until the stock trades at or through the stop price, then becomes a market order. A STOP-LIMIT becomes a limit order when triggered. Placement mnemonic BLiSS: Buy Limits and Sell Stops sit Below the market; buy stops and sell limits sit above. Example: stock at $50, sell stop at $46. Trades print $47, then $45.90: the stop triggers at $45.90 and sells at the next market price. DAY orders expire at the close; GTC orders stay open until filled or cancelled.
📈 In the real world
📉 Dana, a fictional customer, owns shares at $62 and fears a drop. Her rep explains a sell stop at $55 would trigger a market order if the stock trades at or below $55, so the fill could be lower than $55 in a fast market. Dana chooses a sell stop-limit at $55 with a $54 limit, accepting that the order might not fill at all.
📌 Takeaways
- Market = execution now; limit = price or better, maybe no fill
- Stops wait for a trigger, then become market (stop-limit: limit) orders
- BLiSS: Buy Limit and Sell Stop below the market; buy stop and sell limit above
📖 Terms in this lesson
Market order: An order to buy or sell immediately at the best available price, which guarantees execution but not price.
Limit order: An order to buy at or below, or sell at or above, a set price; it guarantees price but not execution.
Stop order: An order that becomes a market order once the stock trades at or through the stop price.
Stop-limit order: An order that becomes a limit order once the stop price is reached.
Good-till-canceled (GTC): An order that stays open until filled or canceled, unlike a day order, which expires at the close.
BLiSS (order placement): Buy Limits and Sell Stops sit below the market; sell limits and buy stops sit above it.
✅ Test yourself
A stock trades at $30. Which order is placed below the current market price?
- Buy stop at $32
- Sell limit at $33
- Buy stop at $31
- Sell stop at $27
Answer: D · Sell stop at $27
BLiSS: buy limits and sell stops go below the market. A sell stop at $27 protects a long position. Buy stops and sell limits go above the market, so the other three are above $30.
What happens when the price of a stop order is reached?
- It becomes a GTC order
- It becomes a market order
- It fills at the stop price
- It is cancelled at once
Answer: B · It becomes a market order
A triggered stop becomes a market order and fills at the next available price, which may differ from the stop price. It is not cancelled, and day/GTC describes duration, not what the trigger does.
A customer wants to buy only if the price is $18 or lower. Which order fits?
- Buy stop at $18
- Buy limit at $18
- Market order today
- Sell stop at $18
Answer: B · Buy limit at $18
A buy limit sets the highest price the buyer will pay, so it fills at $18 or lower. A buy stop triggers when the price rises to $18 or higher, the opposite intent.
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