Concept
Order Types: Market, Limit, SL and SL-M
An order type specifies how an instruction reaches the exchange. The central trade-off is between certainty of execution and certainty of price — no order type provides both.
How to read it
- A market order prioritises execution. It fills at whatever price is available, which may differ from the last traded price.
- A limit order prioritises price. It fills only at your price or better, and may not fill at all.
- A stop-loss (SL) order rests until a trigger price is reached, then enters the book as a limit order. An SL-M enters as a market order instead — it prioritises getting out over the price obtained.
Where the difference shows up
A stock closes at ₹840. Overnight news arrives and it opens at ₹790. A resting SL-M with a trigger of ₹820 becomes a market order at the open and fills near ₹790 — well past the trigger, because no trading occurred between ₹840 and ₹790. A resting SL with trigger ₹820 and limit ₹818 is also triggered, but its limit sits above the market and it may not fill at all, leaving the position open. Neither behaved incorrectly; each did precisely what its type specifies. This is why the distinction matters more than it appears in normal conditions.
What it does not tell you
- A market order provides no price certainty. In thin conditions or on a gap the fill can be materially away from the last price.
- A limit order provides no execution certainty. Price can reach your level, fail to fill because of queue position, and continue away.
- A stop-loss limit can be triggered and then not fill if price moves through the limit rapidly — leaving the position open in exactly the conditions the order existed to handle.
Frequently asked questions
What is the difference between SL and SL-M?
Both rest until a trigger price is reached. An SL then enters as a limit order, giving price control but risking no fill. An SL-M enters as a market order, prioritising exit over the price obtained.
Why did my stop-loss not execute?
A stop-loss limit order can be triggered without filling if price passes through the limit too quickly or the queue does not reach you. The trigger starts the order; it does not guarantee a fill.
Is a market order always filled?
It is filled as long as there is a counterparty, but not necessarily near the last traded price. In thin conditions or across a gap the fill can be far away.
Which order type should I use?
That depends on whether execution certainty or price certainty matters more in your situation, and it is a decision only you can make. This page describes what each type does mechanically; it does not recommend one.
Related
- Slippage — Concept
- Liquidity and the Bid-Ask Spread — Concept
- Position Sizing Basics — Strategy
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
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