You set a sell stop at $45 while a stock trades at $50. Bad news arrives overnight, and the next trade is at $40. Your stop can sell at $40. A stop-limit with a $44 minimum might sell nothing. How can both be working exactly as instructed?
The difference is between a trigger and a price limit. One starts the order; the other sets the price it may accept. The examples use made-up US stock prices and exclude fees and taxes.
What each instruction promises
| Order | Active when | Price condition | Main risk |
|---|---|---|---|
| Market | Sent to market | None | Uncertain price |
| Limit | Sent to market | Limit or better | No fill |
| Stop | Trigger hit | None after trigger | Uncertain price |
| Stop-limit | Trigger hit | Limit or better | No fill |
No order gives you both a guaranteed price and a guaranteed fill, a trade for some or all of your order. A partial fill leaves some shares untraded.
A stop adds a trigger to a market order; a stop-limit adds one to a limit order. The trigger decides when the instruction starts working.
Market and limit orders
A market order asks your broker to trade at the best available price. For a buy, the ask is your starting point; for a sell, the bid. A trading halt can still delay execution.
Return to the previous lesson's sell offers: 100 shares at $50.10 and 200 at $50.20. Keep them fixed, with your order first in line.
A market buy for 150 shares takes 100 at $50.10 and 50 at $50.20. You pay $5,010 + $2,510 = $7,520.
$7,520 ÷ 150 = about $50.13 per share. You saw an ask of $50.10, but there were not 150 shares for sale at that price.
That roughly $0.03 difference per share is slippage: the difference between the price you expected and the price you got. A trade can also beat the quoted price, called price improvement.
A limit order sets the most you will pay to buy or the least you will accept to sell. With a $50.10 buy limit, the same order buys 100 shares for $5,010 and leaves 50 waiting. It cannot pay $50.20 for the rest.
The unfilled 50 shares are still an instruction to buy. “Accepted” does not mean filled, and a cancellation request is not a confirmed cancellation. Those shares can still fill before cancellation takes effect.
A $50.20 buy limit would buy all 150 shares immediately for the same $7,520 as the market order. A buy limit is a ceiling, not a target. But a price touching your limit does not guarantee a fill: other orders can use up the shares before yours gets a turn.
Stops trigger another order
A stop order becomes a market order when the stock reaches its stop price, the trigger. A sell stop activates at or below that price. A stop-limit order becomes a limit order instead.
A price gap is a jump that skips prices with no trades between them. In the opening example, the price jumps from $50 to $40 without trading at $45.
Compare selling 100 shares with a $45 stop or a $45 stop/$44 limit. For these examples, stops stay live overnight and trigger only on trades during the regular session. The next session's first trade is $40. Buyers still bid $40 for all 100 shares, with no higher bids.
The stop brings in $4,000 instead of the imagined $4,500. The stop-limit leaves every share exposed to further falls while bids stay below $44. A stop price starts an exit; it does not set the exit price.
What if buyers later offer $44.50? The triggered stop-limit can sell at that price if it is still open. It does not need to reach $45 again. The trigger has already done its job.
The same mechanics apply within a trading day. Even a brief dip can trigger a stop before the price recovers.
A moving trigger
A trailing stop moves the trigger with the stock, using a dollar or percentage distance. It can lead to either a market or a limit order. For a sell, the trigger follows new highs and stays put when the price falls.
Start a $5 trail at $50: the trigger is $45. When the price rises to $56, the trigger rises to $51. Prices then slip to $54 and $51, but the trigger stays at $51. That final trade activates the order; it does not promise a $51 sale.
How long the instruction lasts
Time in force means how long the broker keeps trying to fill an order.
- A day order expires when its specified trading session ends.
- A good-til-canceled (GTC) order carries over to later days until fully filled, canceled or expired. Your broker sets that expiration date; the name does not mean forever.
Stock splits can also change or cancel open orders. FINRA's timing guide explains order lifetimes and other settings.
An order can stay open overnight without being allowed to trade overnight. GTC sets the lifetime; session settings determine the trading hours. Some brokers accept only limit orders outside regular hours. Market hours covers those sessions.
Choose the trade-off you can explain
The optional pre-trade checklist tests your reasons for trading. Here, the task is to match your order instructions to the trade-off you are willing to make:
- Speed matters most. A market order puts execution first and accepts an uncertain price.
- Your price is firm. A limit order sets that boundary and accepts a wait or no fill.
- A move would prompt an exit. A stop accepts an uncertain sale price. A stop-limit accepts the risk of keeping every share. The later when-to-sell lesson examines reasons for exiting.
There is no setting that makes the trade-off disappear.
On the ticket, check the security, buy or sell, quantity and unit (shares or dollars), order type, trigger and limit, lifetime, and session. Your first purchase takes those choices through preview, execution and confirmation.
In short
- Market orders put execution first; limit orders set the price you will accept.
- A stop price is a trigger, not a guaranteed sale price.
- A stop-limit can leave every share unsold after a gap.
- A trailing sell trigger follows new highs but stays put when prices fall.
- GTC keeps an order open across days; it does not automatically allow overnight trading.