Every trade ends with a choice nobody explains properly: buy it now, or buy it at a price you name. Press the first button and you get the thing immediately, at whatever price the market offers. Press the second and you get your price, or nothing at all. Same share, same screen, quietly different outcomes.
This guide explains the two basic order types, a market order and a limit order, with invented numbers so the sums are visible. It is educational only: nothing here is advice, and nothing here suggests buying or selling anything.
A market order says “trade now at the best price available”: speed is guaranteed, the exact price is not. A limit order says “trade only at this price or better”: the price is protected, the trade is not guaranteed. Neither makes a share safer or riskier. They only change how you get in or out.
A market order tells the exchange to buy or sell straight away at the best price currently on offer. If you are buying, you pay the lowest price any seller is asking right now. If you are selling, you receive the highest price any buyer is bidding. In a busy, heavily traded share this happens in a blink and the price you get is usually very close to the one you saw on screen.
The catch is in the word “usually”. You do not choose the price; the market does, at the moment your order arrives. If the price jumps between your tap and the trade, or if few people are trading that share, you can end up paying more (or receiving less) than you expected. That gap between the price you expected and the price you got is called slippage.
A limit order adds a condition: a price you will not go past. A buy limit says “buy, but pay no more than this.” A sell limit says “sell, but accept no less than this.” Your order then waits in the queue of orders (the order book) until the market reaches your price, if it ever does.
That is the whole trade-off. A limit order protects the price and gives up certainty of execution. The market may never touch your price, in which case nothing happens. Or it may touch it only briefly and fill part of your order. Many providers also let you set how long a limit order stays alive, for example until the end of the day or until you cancel it; the options and their names vary by provider.
Say a share shows a bid of £99.90 (the best price a buyer will pay) and an ask of £100.10 (the best price a seller will take). The gap, 20p, is the spread. The market-mechanics lesson in our Learn hub shows how that order book is built.
You want 10 shares. A market order to buy takes the ask: roughly 10 × £100.10 = £1,001.00, immediately. If the cheapest sellers only have 4 shares at £100.10 and the next seller wants £100.30, the order keeps working up the queue, so your average price would be a touch higher. In a calm, busy market that difference is tiny. In a thin or fast market it can be larger.
A limit order to buy at £99.50 behaves differently. It sits below the market. If the price drifts down to £99.50, you buy 10 shares for £995.00. If the price never gets there and instead heads upwards, you buy nothing, and you watch the share leave without you. Neither outcome is “right”. The limit order gave you control of the price and cost you the certainty of getting in.
| Question | Market order | Limit order |
|---|---|---|
| What you control | Whether to trade now | The worst price you will accept |
| Does it execute? | Almost always, immediately | Only if the market reaches your price |
| Is the price certain? | No: you get what is available | Yes: your price or better |
| Main risk | Paying more or receiving less than expected | Missing the trade, or only a partial fill |
| Hurts most when | The share is thinly traded or moving fast | The price moves away and never comes back |
| Pays the spread? | Yes, crossing it straight away | Not necessarily; you may wait to be matched |
Spreads, fees and how orders are routed differ between providers and change over time, so treat the table as the logic of the two order types rather than a description of any specific broker.
This is a way of thinking, not a recommendation. For a very liquid share, where the spread is tiny and plenty of people are trading, the price you see is close to the price you get, so the gap between the two order types narrows. For a thinly traded share, the spread is wider and a market order can cost noticeably more than it looked, which is why people often reach for a limit there. Our lesson on liquidity risk explains why thin markets behave this way.
Timing matters as well. Prices can move sharply around company results or big news, and a market order placed in that moment can fill far from the last price you saw. A limit order can protect against that, but it can also leave you stranded when the move is the whole point. The honest summary: you are choosing which mistake you would rather risk, paying too much or not getting in at all.
Order types are not a trick for making money. A limit order does not make a share cheaper in any lasting sense; it just names the price you will accept. A market order is not reckless by itself either; it is simply the price of immediacy.
Three habits are worth watching for. First, setting a limit so far from the market that it never fills, then deciding the share was “obviously going to rise” because it left without you. Second, chasing: cancelling and re-pricing again and again until you are effectively paying the market price anyway, only slower. Third, treating the order type as the decision. Whether to hold something at all is a separate question, covered in trading versus investing, and the mental traps that creep in are in our lesson on behavioural biases.
There are also other order types, such as stop orders that become live once a price is reached. They add their own wrinkles (a stop can trigger at the worst moment in a fast market), so learn the two basics first. For how prices move in the first place, see understanding market price movement, and for the broader mechanics, the how markets work lesson has its own short market-versus-limit section.
No. People use both, depending on the share, the market conditions and how much they care about speed versus price. The skill is knowing what each instruction actually promises, so the result never surprises you. If you are working out how small amounts fit into this, fractional shares explained covers position sizes, and virtual stock trading covers what practising without real money does and does not teach.
RIP. is an educational simulation for teenagers. Every player starts with $10,000 in virtual cash and trades on real market prices, with head-to-head duels, school leaderboards and 88 short lessons. There is no real money, no real trading and no brokerage. This guide does not claim RIP. offers any particular order type; the point is that the ideas here, price versus certainty and what moves a price between your decision and the trade, are what virtual practice is for. Parents wanting the detail can read Is RIP. safe?, and the lessons are all in the stocks section of the Learn hub.
Nothing here is financial advice or a prediction about any market, share or asset. All prices and figures are hypothetical. RIP. is an educational simulation using virtual currency on real prices — a place to practise and learn, never a place to put real money to work, and never intended for under-18s to invest real money.
A market order trades immediately at the best available price, so it almost always fills but the exact price is not guaranteed. A limit order trades only at your chosen price or better, so the price is protected but the order may not fill.
Neither is better in general. A limit order protects your price at the cost of possibly missing the trade; a market order secures the trade at the cost of price certainty. Which fits depends on how liquid the share is and what you care about more.
Yes. If the market never reaches your price, nothing happens, and an order can fill only in part. Many providers let you choose how long a limit order stays open, but the options vary.
Yes. A simulation using virtual money on real prices lets you learn how prices, spreads and timing work with nothing at stake. This guide is educational, not advice, and RIP. uses virtual currency only.
$10,000 in virtual cash on real market prices, head-to-head duels and 88 short lessons. Virtual money only, nothing to deposit. Free on iOS.
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