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Invest With Us: Market/Limit Order

What is a Market/Limit Order?

A market/limit order is an order to buy or sell a single security that you send immediately to the market, rather than placing a Window Trade. You will generally pay a commission for each security order that is executed through a market/limit order.

Some securities can only be bought or sold through a market/limit order because they are not Window Tradable Securities, meaning they cannot be traded in a window trading session. You can place a market/limit order for any security that is available for trading on the system, including both Window Tradable Securities and Non-Window Tradable Securities.

The Different Types Of Market/Limit Orders

Market Order

When you place a Market Order, you are asking for an immediate execution at the best price available in the marketplace. Market orders are the most common type of order, and have the advantage of nearly always being filled, since a market order does not specify a price at which the trade is to be executed.

In a volatile fast moving market, a market order may receive an execution price significantly different from the quoted price of that security when the order was entered. Also, if you place a market order when the markets are closed, such as at night, over weekends or on market holidays, your order will be executed when the market next opens. There can be substantial changes between the most recent closing price of a security (which is the price usually quoted on the site during hours when the market is not open) and the next opening or available price.

Limit Order

A limit order allows you to specify the price (the limit) you would like your order to be executed at. A limit order to buy a security means that the order will be executed at the limit price or lower, and a limit order to sell a security means that the order will be executed at the limit price or higher. Limit orders have the advantage, when they are executed, of being executed at a specific price, or better; however your limit order may never be executed because the limit price may never be met or the market could quickly move away from your limit price before your order can be filled.

Stop Order

With stop orders, you place an order to be executed only after the stock has reached a specified price (the stop price). A stop order to buy a security is placed above the current market price and automatically becomes a market order to buy when the stop price is reached. A stop order to sell a security is placed below the current market price and automatically becomes a market order to sell when the stop price is reached.

As with any market order in volatile markets, the market order triggered at the stop price may receive an execution price significantly different from the stop price of that security when the order is triggered. Also a stop order may be executed at a price very different from the stop price if, for example, the stop order was entered after a market close and the security subsequently opens at a price much higher or lower, as compared to the applicable stop price.

Stop-Limit Order

A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomes a limit order to buy or to sell at the specified price.

The benefit of a stop-limit order is that you can control the price at which the trade will get executed. As with all limit orders, a stop-limit order may never get filled if the stock’s price never reaches the specified stop and limit prices. This may happen especially in fast-moving markets where prices fluctuate dramatically.

Spread Specific Order

When an order is placed to buy or sell NextShares™ exchange-traded managed funds outside of a Window, you can enter the order as a market order or as a “Spread Specific” order. A Spread Specific order allows you to specify the trading costs (up to $0.99) over or under the next end of day NAV for a NextShares™ fund.

As an illustration, assume that a NextShares™ fund is quoted intraday at a best bid of NAV - $0.01 and a best offer of NAV + $0.02. A Direct Trade market order could be executed at the quoted offer price, in this example, at NAV + $0.02. If the fund’s next published NAV is $20.00, your final trade price would be $20.02. A Spread Specific order to buy may, alternatively, be entered intraday at NAV + $0.01. That order, because it is neither a Window nor a market order, will only execute if the best ask drops to NAV + $0.01. If executed, your final trade price with a next published NAV of $20.00 would be $20.01.

Order Term: Day & Good ‘Till Cancelled (GTC) Orders

Unlike with Market Orders, which are executed shortly after they reach the market, for Limit, Stop or Stop/Limit orders, you need to specify the Term, which is how long you would like your order to remain open for execution.

Your order will remain open until either the limit price or stop price is met and the order is executed, or at the end of the specified time period:

  1. Day: A Day order means that your order is good until the market closes on that day (or the next trading day if you place your order when the market is closed). If at the end of that day your order has not been filled, then it is canceled.
  2. GTC: A Good ‘Till Cancelled (GTC) Order () means that your order will remain open either until it is executed or for 90 days, whichever comes first. If the 90th day falls on a weekend or holiday, the order will expire on the next business day.

One thing to keep in mind is that GTC Limit Orders and GTC Stop/Limit orders are sent to the market as All or None orders. Therefore, even if your price target is met, there is a chance that your GTC order will not be filled, since all unrestricted orders at that price must be filled first.

All other orders (Market, Stop, Limit Day, Stop-Limit Day and GTC Stop Orders) are sent to market with no conditions. As a result, for these orders, there could be a time when only part of your order is executed (e.g., 400 of 1000 shares are executed as part of a partial order execution). Read more about Order Execution and Conditions for Executing Orders below.

Setting a Limit Price or Stop Price

When submitting a Limit Order, a Stop Order, or a Stop-Limit Order you will need to specify the price at which you want your order to be triggered for execution.

Limit Price

The Limit Price is the price at which you want your order to buy or your order to sell to be executed.

  • Buy limit orders state the maximum price at which to buy, and can only be executed at the limit price or lower.
  • Sell limit orders state the minimum price at which to sell, and can only be executed at the limit price or higher.

Although a limit order enables you to specify a price limit, it does not guarantee that your order will be executed. You should monitor your orders. See Order Execution and Conditions for Executing Orders below for more detail.

Stop Price

The Stop Price is the price of the security that will trigger either a Stop Order or a Stop-Limit Order. With Stop Orders, the order is converted to a market order when the stop price is met and executed at the best price available thereafter. With a Stop-Limit order, the order is converted to a limit order when the stop price is met and is then executed at the limit price or better.

Order Execution and Conditions for Executing Orders

A critical factor in choosing whether to place a Market, Limit, Stop, or Stop/Limit order is understanding when those orders will be executed. Unlike Market orders, which are executed shortly after they reach the market, with Limit, Stop and Stop/Limit orders there can be circumstances under which your order may never be executed:

The price you set for your limit buy order is below the stock’s current ask price, or above the stock’s current bid price if you are selling. But if the stock price never reaches the limit price, your order will never be executed. Orders at each limit price are filled in the sequence they are received. So even if the stock reaches the limit price you have specified, your order may not be executed if there are other orders ahead of yours that are executed first and cause a change of the market price because there are not enough shares available to fill all open orders. Under those circumstances your order will have to wait until the next time the stock hits that particular limit price or better.

You should also be aware of the conditions under which orders are sent to the market. GTC Limit Orders and GTC Stop-Limit orders are sent to the market with a condition of All or None. This means that your order will only be executed if all the shares in your order can be executed.

All other orders (Market, Stop, Stop/Limit Day and Limit Day Orders) are sent to market with no conditions. As a result, there could be a situation in which only part of these types of orders are filled, and you may have to enter additional orders to complete the full amount of your original order.

Market/Limit Orders and Your Amounts Available for Trading

You must have sufficient cash available to cover the cost of all buys. This includes the purchase price of the security, plus the commission costs. The estimated total cost (both the purchase price of the security and the commission) based on the limit or stop price you specify for such an order will be subtracted from your Amounts Available at the time the order is placed, and will remain subtracted if the order is executed (adjusted for any difference in the actual price obtained upon execution) or until the order is cancelled. If the order is cancelled and has not been executed, the cost, including commissions, will be added back to your Amounts Available.

Placing Market/Limit Orders When You Have a Pending Window Order

When you have an unexecuted Window Order, you are restricted to placing Market/Limit orders only on the securities currently held in your account that are not subject to a pending trade. The reason is that until your window order is executed, the number of actual shares that you will own after that transaction is complete will not be known.

Fractional Shares & Sellable Shares

Our unique Window Trading system provides you the ability to own fractional shares in your Folios. However Market/Limit orders can only be placed in whole shares.

The total number of Sellable Shares could be less than the total number of shares you own in your account because:

  • Fractional Shares cannot be sold through a market, limit, stop or stop-limit order—they can only be purchased or sold through a window order.
  • If you have a pending Window Order that is dollar-based to sell a security that you own, you are restricted from placing another order (of any type) on that particular security until after the order is executed and the trade is posted to your account or is cancelled. The reason is that when window trades are dollar-based the total number of shares affected by that transaction cannot be determined until the order is executed.

Note: You can cancel a Pending Window Order and then place a market, limit, stop or stop-limit order for those securities.

Mutual Funds and Market/Limit Orders

You cannot place a limit, stop or stop-limit order for a mutual fund. Mutual fund orders must be received prior to the last window for a window trade, or the market close for a market order, on days that the market is open. Mutual fund orders received later than this, or on weekends or holidays, will be executed on the following business day.

We also offer a unique Trade at Close Program for advisors in which they can place mutual fund model orders as late as four minutes before the daily order entry cutoff time for the mutual fund families supporting this late day trading.

Which securities can I buy or sell through a market/limit order?

Securities traded on a domestic exchange are generally Window Tradable and can be traded with a market or limit order as well–see the full list.

How much does it cost to execute a trade using a market/limit order?

You will generally pay a commission for each security you trade that is executed using a market/limit order, and the amount will be shown to you on the Preview Order page.

How do I place a Market/Limit Order?

  1. From your Accounts page, select Place Market/Limit Order for the Folio in which you wish to place the trade
  2. All of the holdings for the Folio will be presented. If you want to buy a new security, select Add New Securities
  3. Select the desired action for each security: Buy, Sell, or Sell All
  4. Select the Order Type: Market, Limit, Stop, Stop-Limit
  5. Enter the number of shares
  6. For Stop and Stop/Limit orders, enter the Stop Price
  7. For Limit, and Stop/Limit orders, enter the Limit Price
  8. Select the Term of your limit order: Day or Good ‘Till Cancelled

Can I place a Market Order for an entire Folio?

To buy or sell a Folio through a market order, select Convert to Market/Limit Order on the Preview Order page. You will go to a new Preview Order page where you will see your orders as well as the commissions for those trades. Note that you will generally pay a commission for each security you trade that is executed using a market/limit order, which could be a large number of securities if you buy or sell a whole Folio and as a result a large commission charge.