When you place a trade, the default order type is a Market Order. When placing an order, you can choose between a trade for a dollar amount (Amount 💰) or a number of shares (Shares 📈). More advanced options include Limit and Stop orders. Below are the key differences between each.
Market Order (Amount 💰)
This order type allows you to input a dollar amount 💵 for which you want to place a buy/sell order for a certain share. The market order will be executed at the current available market price. For example, you input $50 to buy AMZN shares and confirm the transaction. This means you will buy $50 worth of shares or fractional shares of Amazon at the current market price available.
If you place the order when the market is closed, a pending order is created and will be executed once the market opens at the market price available. The minimum amount to invest is $1 USD.
Market Order (Shares 📈)
This order type allows you to input the number of shares or a fraction of a share you want to buy/sell. The market order will be executed at the current available market price. For example, you input a 1/2 of an AMZN share and confirm the transaction. This means you will buy a half share of Amazon at the current market price available. Before placing a market order in Shares, make sure you have sufficient funds in your account. If you place the order when the market is closed, a pending order is created and will be executed once the market opens at the market price available. The minimum amount to invest is $1 USD.
Limit Order
A limit order allows you to specify a price at which you want to buy/sell a certain share. To place a Limit Order, input the number of shares you want, then indicate the price you want to buy/sell them at. For example, if you want to buy/sell 1 share of AMZN at a price of $3,400 USD, the order will only be executed if the Amazon stock price reaches $3,400 USD or better. Limit orders are good-til-canceled, which means the order is working until it executes or you cancel it manually. If you no longer want to buy/sell at the price you indicated, make sure to update your price or cancel the order altogether. Also note, that some orders might not be able to be executed at the specific price you indicate. If you place the order when the market is closed, a pending order is created and will be put to work once the market opens.
Stop Order
Stop order allows you to buy/sell a share at the market price once the share has traded at or through your specified price (the 'stop price’). When the share reaches your stop price, the order becomes a market order and is executed at the next available market price. This is the core difference from a limit order, where the trade is only executed at your indicated price or better.
A stop order may be appropriate when the shares you own have risen and you seek to protect your gain in case they begin to fall. Another scenario could be when you want to buy a share as it starts rising above a certain level in a belief that it will continue to rise.