3 Basic Command Types Explained

Orders are at the heart of e-commerce. Therefore, understanding the different order types is an important first step in learning to trade.

This article describes the function and meaning of 3 basic command types:

  1. limit orders
  2. Stop Market Orders
  3. Stop Limit Orders


Please watch this 2 minute video for an introduction to these types of commands.

1 . limit orders

A limit order is executed only when the market price satisfies a user-defined limit price. Buy limit orders can be placed below the price action, while sell limit orders are placed above the current price.

These orders are used to both enter and exit trades. For example, a trader can buy a market when their buy limit order is reached and use a sell limit order when the price reaches a predetermined level.

Stop Market Orders

Like limit orders, stop-market orders are executed when the market reaches a set price. However, buy stop orders are placed above the market price and sell stop orders are placed below the market price. This is the opposite of limit orders.

Another name for a stop-market order is “Stop Loss” because these orders are often used to prevent open positions from temporarily exiting a trade as a loss.

Stop-market orders can also be used to enter a trade if a specific price level is breached. This is commonly referred to as a breakout trade. It is important to note that market stop orders become market orders once the market reaches the stop price.

3 . Stop Limit Orders

Stop-limit orders act as a hybrid between stop market orders and limit orders. These orders are executed at a specified price or better after hitting a stop price. This means that a trader must set a stop price as well as the limit value.

Stop-limit orders give traders more control over order entry, but as there is a limit value involved, orders are not guaranteed to be executed. While this can help traders avoid market moves that cause what is known as slippage, it is important to be aware that these orders are not guaranteed to be filled, especially when used to exit. a transaction.

NinjaTrader’s award-winning software offers traders multiple options for order entry, including Basic Entry, SuperDOM, and Chart Trader interfaces. More advanced order types, including market if hit (MIT) and one cancels the other (OCO), can also be invaluable tools for traders.

Ready to try it yourself? NinjaTrader is always free to use for advanced charting, strategy development, trading simulation, and more. Start FREE today.

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