When you buy a stock, your broker asks you a question that many investors answer without thinking: market or limit? The choice decides whether you control the price you pay or the certainty of buying. You cannot have both.
The market order
A market order says: "buy now, at whatever price there is".
- What it guarantees: the order is executed, almost always immediately.
- What it does not guarantee: the price. You pay the best price available at that moment, which can be different from the last price you saw on the screen.
In large, liquid stocks during normal hours the difference is usually tiny. It grows in three situations:
- At the open, when the price can jump from the previous close.
- In small or illiquid stocks, where there are few buyers and sellers.
- During fast moves, after news.
The limit order
A limit order says: "buy, but never above this price".
- What it guarantees: you will not pay more than your limit.
- What it does not guarantee: execution. If the price never comes down to your limit, the order is not filled and you do not buy.
A limit order can also be filled at a better price than the limit: if you put a limit at 50 and the stock opens at 48, a buy is filled at 48, not at 50.
Side by side
Gaps: what happens between sessions
Prices do not move continuously from one day to the next. A company can publish results after the close and open the next day well above or well below the previous close. This jump is called a gap.
- With a market order placed before the open, a gap up means paying much more than you planned.
- With a limit order, a gap up simply leaves the order unfilled: you do not buy a stock that has already run away from your price.
- A gap down, on the other hand, fills a limit order at the opening price, below the limit.
This is the main reason why a limit order is the natural choice when you buy on a plan prepared the night before.
- 1Gap down: It opens below the limit: the limit order fills at the open, at a better price than the limit.
- 1Gap up: It opens above the limit and never trades back down to it: the limit order is not filled. A market order would have paid the gap.
How long an order lives
Brokers let you choose how long an order stays active. The usual options are:
- Day: it is cancelled at the end of the session if it has not been filled.
- Good till cancelled: it stays until it is filled or you cancel it.
A plan built on yesterday's close is a plan for one session. If the order is still open days later, the situation that justified it may no longer exist.
How to place the buy of an InbestPlanners signal
Every signal publishes its buy price as a limit order:
- The limit: the close that produced the signal +0.5%.
- Validity: the next session only.
- How it is filled: if the stock opens at or below the limit, the buy is filled at the open; if the price touches the limit during the session, it is filled at the limit; if neither happens, the signal is discarded and you do not chase it.
In your broker this means a limit buy, valid for the day, at the published price. The target and the stops are measured from that published price, so you can enter them as soon as you know your order has been filled.
Some exits, such as a close below the 200-session average or the time limits, are evaluated at the close and executed at the next open, which in practice is a sale at the opening price. The guide From Signal to Exit explains each step, and the rules are on the methodology page.
Three common mistakes
1. Buying at market before the open. It is the order most exposed to a gap.
2. Raising the limit to make sure you buy. If the stock is already above your price, the plan you made was for a different situation.
3. Leaving orders alive for weeks. A forgotten limit order can be filled on a day when you would no longer want the stock.
In short
- A market order guarantees execution, not price; a limit order guarantees price, not execution.
- Gaps between sessions are where the difference matters most.
- For a plan prepared the night before, a limit order valid for one session is the natural choice.
- Our signals publish their buy as a limit at the close +0.5%, valid only for the next session.
This content is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results.