Order Types in Stock Market: Your Guide to Precise Trade

This article is part of our comprehensive trading course, Master the Art of Trading, designed to guide you step-by-step through market mastery.

Have you ever wondered how traders actually buy or sell shares once their Demat and Trading Accounts are set up?

In our previous article, we explained “What is a Demat Account and How to Open One?” — a must-read for beginners! Now that you have a Demat account, it’s time to learn how to place different types of orders in the stock market.

Understanding order types is crucial for safe and successful trading. Whether you’re a beginner or a growing trader, knowing when and how to use these orders can save your capital and protect your profits.

Understanding Trade Orders: Your Instructions to the Market

An order is simply an instruction you give to your broker (via your trading platform) to buy or sell a stock or option at a specific price or condition.

There are 4 primary types of orders every trader must know:

Order Type	Full Form	Purpose	Price Control	Risk Control
Market	Market Order	Execute immediately at current price	❌ No	❌ No
Limit	Limit Order	Execute at a specific price or better	✅ Yes	❌ No
SL	Stop Loss	Exit a position when price hits SL	✅ Yes	✅ Yes
SL-M	Stop Loss Market	Exit position at market price on SL	❌ No	✅ Yes

1. Market Order: Instant Execution

What it means: Buy or sell immediately at the current market price.

✅ When to Use:

You want to enter or exit quickly.
You don’t care about the exact price.

❌ Risk:

Price may change slightly between the time you place the order and the time it’s executed (called slippage).

🔍 Example:

You want to buy TCS, and its current market price is ₹3,500.
You place a Market Buy Order.
Your order is executed instantly at ₹3,500 (or very close to it).

2. Limit Order: Precision Entry/Exit

What it means: Buy or sell only at your chosen price or better.

✅ When to Use:

You want full control over the price.
You’re okay if the order doesn’t execute immediately.

❌ Risk:

The price may never reach your limit, and your order might remain pending.

🔍 Example:

You want to buy TCS at ₹3,480 (lower than current market price of ₹3,500).
You place a Limit Buy Order at ₹3,480.
Your order will execute only if the price comes down to ₹3,480.

3. Stop Loss (SL) Order: Your Defensive Shield

What it means: A defensive order to sell or buy when the price hits a specific level, used to limit losses.

✅ When to Use:

You’re holding a position and want to limit your loss.
You want to control both trigger price and execution price.

❌ Risk:

If market is fast-moving, the order may not fill if the price jumps over your limit.

🔍 Example:

You bought TCS at ₹3,500, and want to limit your loss at ₹3,470.
You place a Sell SL Order:
Trigger Price: ₹3,470
Limit Price: ₹3,468
When price hits ₹3,470, your order becomes active, and executes between ₹3,470 and ₹3,468.

4. Stop Loss Market (SL-M) Order: Guaranteed Exit

What it means: Similar to SL, but executes at market price once triggered.

✅ When to Use:

You want to ensure exit when price hits stop-loss.
No concern for exact price of exit.

❌ Risk:

Could exit at a worse price if the market is volatile (more slippage).

🔍 Example:

Bought TCS at ₹3,500, want to exit no matter what if price drops to ₹3,470.
You place a Sell SL-M Order:
Trigger Price: ₹3,470
Once price hits ₹3,470, your order becomes a market order and gets executed at best available price.

Quick Comparison: Understanding Order Types

Order Type	Full Form	Purpose	Price Control	Risk Control
Market	Market Order	Execute immediately at current price	❌ No	❌ No
Limit	Limit Order	Execute at a specific price or better	✅ Yes	❌ No
SL	Stop Loss	Exit a position when price hits SL	✅ Yes	✅ Yes
SL-M	Stop Loss Market	Exit position at market price on SL	❌ No	✅ Yes

Essential Tips for Placing Orders

Start with Limit Orders to avoid surprise prices and ensure precise entries or exits.
Always use SL or SL-M to protect your capital and manage your risk, especially as part of your exit planning.
Don’t place Market Orders in options — spreads can be very wide, leading to significant slippage.
Understand how order types fit into your overall trading plan and risk management strategy.

Coming Next:

In our next post, we’ll explain: “What is a Candlestick Chart and How to Read It Like a Pro?”

Stay tuned, and keep learning step-by-step!

If you missed our earlier guide, read it here: 👉 “How to Open a Demat Account?“