Order Types & How Trades Actually Execute
Market, limit, stop orders, SL and TP — plus the spread and slippage reality your backtest conveniently forgets.
Market Orders
A market order executes immediately at the best available price. You get in now — but you accept whatever price the market gives you.
Use it when speed matters more than precision: breakouts, news, or getting out of a bad trade fast.
Limit & Stop Orders
- Limit order — buy below / sell above the current price. You set the price and wait.
- Stop order — buy above / sell below the current price. Triggers on momentum, often used for breakouts.
Pending orders let you plan the trade in advance instead of reacting.
Stop Loss & Take Profit
A stop loss closes your trade at a defined loss. A take profit closes it at a defined gain. Together they turn an open position into a trade with a known maximum risk and target.
Execution Reality: Spread & Slippage
The price your plan assumes and the price you actually get are different:
- Spread — the gap between bid and ask you pay on entry.
- Slippage — the difference between expected and filled price, worst in fast markets.
- Latency — the milliseconds between your click and the fill.
Short-term strategies feel these costs the most. A backtest that ignores them is not simulating your real trading.
✅ Key Takeaways
- Market orders favour speed; limit/stop orders favour precision.
- Every trade needs a defined SL and target.
- Spread and slippage are real costs, not details.
- Execution quality matters more as your timeframe shrinks.
⚠️ Common Mistakes
- Trading without a stop loss.
- Using market orders in illiquid conditions.
- Assuming backtest fills equal live fills.
🧠 Quick Quiz
Lock in the lesson — answer, then check your score.
Keep The Momentum.
Finish the track, take the quizzes, and come back to these notes before your next session.