What is an Order

An order is an investor's instructions to a broker or brokerage firm to purchase or sell a security. Orders are typically placed over the phone or online. Orders fall into different available types which allow investors to place restrictions on their orders affecting the price and time at which the order can be executed. These order instructions will affect the investor's profit or loss on the transaction and, in some cases, whether the order is executed at all.


An order is the first step in the process of a financial transaction. Investors work with brokerage firms and trading desks to buy and sell securities for investment. There are numerous exchanges across the market that allow investors to trade all types of securities. The most common is the secondary market where millions of trades are made matching buyers and sellers each day. The secondary market is available to accommodate investment orders from both retail and institutional investors. Other markets also exist for the exchange of securities including third markets, fourth markets and dark pools.

Generally all exchanges trade securities in a bid/ask process that allows investors to get the price they request based on their order type with a spread that gets paid to the market maker. Market makers work for all types of exchanges.

Order Types

The secondary market is one of the most active markets in the financial industry with orders taken from both individual and institutional investors. Individual and institutional investors alike must trade through broker-dealers which require them to place one of several orders. Markets facilitate several order options that provide for some investing discretion when planning a trade order.

Market order: A market order instructs the brokerage or trading affiliate to complete the order at the next available price and by the end of the day. Market orders have no specific price and are generally always executed unless there is no trading liquidity.

Limit order: A limit order instructs the brokerage or trading affiliate to buy a security at or below a specified price. Limit orders ensure that a buyer pays only a specific price to purchase a security. Limit orders can remain in effect until they are executed, expire or are canceled.

Stop order: A stop order instructs the brokerage or trading affiliate to sell a security if it reaches a specified price. The price can be to stop losses or take gains.

Day order: A day order must be executed during the same trading day that the order is placed. Most market orders are usually day orders.

Fill or kill: A fill or kill order must be completed immediately and completely or not at all.

Alternative Markets

A few market exchange options exist outside the traditional secondary market. These markets can include over-the-counter markets (third market), fourth markets (institutional trading) and dark pools (special access institutional trading). All of these markets will use similar market orders to the secondary market and can be transacted through a bid/ask process.