What an order is
The order type you choose determines how much control you have over the price and how certain it is that the order will be executed. There is no "best" order type for every situation; each has advantages and limitations. The order types available may differ depending on the market and the broker.
The main order types
| Order type | How it works | Advantage | Limitation |
|---|---|---|---|
| Market order | Executed immediately at the best prices available in the order book | Fast execution, if there is a counterparty | You do not control the final price, especially on illiquid instruments |
| Limit order | You buy at a price no higher than the limit or sell at a price no lower than the limit | You control the price | The order may remain unexecuted or be partially executed |
| Stop order | Activated when the price reaches a set level (trigger price) and becomes a market or limit order, as applicable | Can limit losses or automate a decision | Once activated, the execution price may differ from the stop level |
A common example of a stop order is the stop-loss order: you hold shares bought at MDL 50 and set a sell order with a trigger at MDL 45. If the price drops to MDL 45, the order is activated and tries to sell, limiting the loss. In a fast-moving market, however, the sale may take place below MDL 45.
Your first trade, step by step
- Check your available balanceMake sure you have enough money in your account for the trade value plus commissions.
- Analyze the instrument and the order bookRead the information published by the issuer, and look at the bid and ask prices and the quantities available.
- Choose the order type, price and quantityDecide whether to use a market order or a limit order, and set the validity period.
- Review and send the orderReread all the details, especially the side (buy/sell), the quantity and the price, then confirm.
- Track execution and confirmationCheck whether the order was executed fully, partially or not at all, and keep the confirmation you receive from the broker.
- Wait for settlementAfter settlement, the instruments are registered in your name in the central depository's records.
Calculating costs and the break-even point
Continuing the example, if Andrei later sold the 300 shares at MDL 31.50, he would receive MDL 9,450, minus an illustrative selling commission of 0.5%, or MDL 47.25. Net amount: MDL 9,402.75. Net gain: 9,402.75 − 9,286.20 = MDL 116.55, before taxes. Without commissions, the gain would have been MDL 210; costs reduced the result by almost half.
Key takeaways
- An order specifies the instrument, the side, the quantity, the type, the price where applicable, and the validity.
- A market order offers fast execution but does not control the price; a limit order controls the price but may remain unexecuted.
- A stop order is activated when a trigger price is reached and can be used to limit losses, without guaranteeing the execution price.
- The total cost of a trade includes commissions, which reduce the net gain, especially on small amounts.
- Check each order carefully before sending it and keep the confirmations from your broker.
Check your knowledge
Answer all the questions. If you answer all of them correctly, the lesson is marked as completed automatically.
Explanation: A limit buy order is executed only at a price no higher than the set limit, that is, MDL 25 or less.
Explanation: The trade value is 200 × 15 = MDL 3,000; the commission is 3,000 × 0.5% = MDL 15; the total cost is MDL 3,015.
Explanation: A stop order is activated when the set level is reached; in a fast-moving market, execution may take place at a worse price than the stop level.
Educational material only. It does not constitute investment, legal or tax advice. Numerical examples are hypothetical.