Order types: market, limit, stop
What you learn in 3 minutesThis lesson explains the three order types you will see on every trading screen, and why the same idea can cost you different amounts of money depending on how you place it. On USD/INR, one pip on one standard lot is ₹10, so a difference of 20 pips between two orders is ₹200 on a single lot. By the end you will know which order takes the price you can see, which one waits, and which one triggers only when the market moves to a worse level.
One idea, three orders, three prices on USD/INR
| Step | Amount | Note |
|---|---|---|
| Current market price | 83.2500 | The price shown on the screen when the reader decides to buy. |
| Market order fill | 83.2500 | A market order takes the current price, so the fill is at or very near 83.2500. |
| Limit order price | 83.2300 | The reader sets a better buy price 20 pips below the market. It fills only if price falls there. |
| Stop order trigger | 83.2700 | The reader sets a worse buy price 20 pips above the market. It triggers only if price rises there. |
| Difference between market and limit | ₹200 | 20 pips on one standard lot, and 20 × ₹10 = ₹200. |
| Difference between market and stop | ₹200 | 20 pips on one standard lot, and 20 × ₹10 = ₹200. |
The broker may round the fill, charge a spread or commission on top, and quote a slightly different price from the one on your screen. These charges vary between brokers, so check the contract note for the exact figures.
The mistake people make here
The common mistake is to use a market order when the reader actually wants a specific price, or to use a limit order when the reader needs the trade to happen no matter what. A market order can fill away from the price you saw, and a limit order can sit unfilled forever while the market moves without you. A stop order is not a safety net for a better price; it triggers at a worse price once the market reaches your level. Decide first whether you need certainty of execution or certainty of price, then pick the order type that matches.Check yourself
You place a limit buy on USD/INR at 83.2200 when the market is 83.2500. How many pips below the market is your order, and what is that worth on one standard lot?
83.2500 minus 83.2200 is 30 pips. On one standard lot, 30 × ₹10 = ₹300.
You place a stop buy at 83.2800 when the market is 83.2500. How many pips above the market is the trigger, and what is that worth on one standard lot?
83.2800 minus 83.2500 is 30 pips. On one standard lot, 30 × ₹10 = ₹300.
A market order fills at 83.2550 instead of the 83.2500 you saw. How much did the 5 pip difference cost on one standard lot?
5 pips × ₹10 = ₹50. That is the extra amount paid because the fill was 5 pips away from the screen price.