Order Types
Order types are the different ways to submit trades, such as market orders and limit orders. The order type you choose strongly affects execution costs.
Definition
Order types describe how a trade is submitted and executed in an order book. The most common types are market orders and limit orders.
Why they matter
Your order type changes your control over price, your probability of being filled, and your execution costs.
Typical cost patterns
• Market orders maximize speed but often increase slippage and effective spread in thin markets.
• Limit orders provide price control and can reduce costs, but introduce the risk of no fill or partial fill.
Common pitfalls
Using one type blindly: The best order type depends on spread, depth, urgency, and your size.
Ignoring book conditions: Always check market depth and the spread before choosing an order type.