Order types (market / limit).
In plain English
When you place a stock order, you tell the broker how to execute it. A market order says 'buy or sell at the best available price right now' and almost always fills immediately. A limit order says 'buy or sell only at this price or better' and may not fill at all if the price never reaches your level. Most retail trades on liquid stocks use market orders. Limit orders are essential on illiquid stocks where the spread is wide.
01Why it matters
Market orders are convenient but give up control of execution price. On a stock with a wide bid-ask spread, a market order can fill 1% or 2% worse than expected. For small trades on big-name stocks, that does not matter; for large trades or anything illiquid, limit orders prevent expensive surprises.
02The math, step by step
A stock shows bid $50.00 and ask $50.10. A market buy fills at $50.10 immediately. A limit buy at $50.05 may fill if the ask comes down, or it may never fill if the price keeps rising. For 100 shares the difference is $5; for 10,000 shares it is $500.
03What this is NOT
A stop order is a third type: it converts to a market order once the stock crosses a trigger price. Stop-loss sell orders are common; they protect against a drop but execute at whatever the market price is when triggered, which can be much lower in a fast move.