Bid, ask and spread: the prices behind every order
Every quote has two prices. The bid is the highest price a buyer is willing to pay right now; the ask (or offer) is the lowest price a seller will accept. The gap between them is the spread. Buy at market and you generally pay around the ask; sell at market and you generally receive around the bid. The last traded price on your screen is not necessarily the price you will get.
Hypothetical: a stock is quoted $49.98 bid and $50.02 ask, a 4-cent spread. Buy at the ask and sell straight back at the bid, and you are 4 cents down before anything happens. With a 60-cent stop, that is about 7% of your risk spent on the entry alone. Liquid stocks and ETFs usually have tight spreads in regular hours; thin stocks and the extended session can be far wider.
Slippage is the difference between the price you expected and the price you got. Send a market order for 300 shares when only 100 are offered at $50.02 and the next sellers sit at $50.04, and you may get 100 at $50.02 and 200 at $50.04: an average of about $50.033, 1.3 cents worse than the quote you saw. The SEC warns that a large market order can fill in pieces at different prices.
- Bid
- The highest price a buyer is currently willing to pay. A market sell order generally fills at or near it.
- Ask (offer)
- The lowest price a seller is currently willing to accept. A market buy order generally fills at or near it.
- Spread
- The ask minus the bid. You pay it on every round trip, and it widens when trading is thin.
- Slippage
- The difference between the price you expected and your actual fill, caused by fast moves, thin liquidity or gaps.
Market order vs limit order: fill or price?
A market order is an order to buy or sell immediately at the best available price. In a liquid stock it almost always fills, but it does not guarantee the price. A limit order is an order to buy or sell at a specific price or better: a buy limit fills only at the limit or lower, a sell limit only at the limit or higher. It controls the price, but it is not guaranteed to fill, because the market has to reach your limit.
Hypothetical, same quote: you place a buy limit at $49.90 near support. If sellers come down to $49.90, you buy there or lower. If price dips to $49.93, turns and runs to $50.80, your order never fills and the move happens without you. That missed trade is the cost of controlling the price. A sell limit works the other way: placed at $51.20 above your entry, it is a take-profit order that fills only at $51.20 or higher.
- Market order: priority on the fill. The price can slip, especially in fast moves, thin stocks and large sizes.
- Limit order: priority on the price. It fills at your limit or better, or not at all.
- A buy limit rests below the current price; a sell limit rests above it.
Stop orders: buy stops above, sell stops below
A stop order, also called a stop-loss order, waits until price reaches a level you choose, the stop price, and then becomes a market order. A sell stop rests below the current price and is usually used to limit a loss or protect a profit on shares you own. A buy stop rests above the current price, to protect a short position or to enter if price breaks higher.
The drawing at the top of the page shows the pattern worth memorizing: limit orders sit on the "better" side of price (buy below, sell above), stop orders on the "worse" side (buy above, sell below). So the order that buys only if price rises to it is a buy stop, and the order that sells only if price falls to it is a sell stop.
Hypothetical: you buy at $50.00 with a sell stop at $49.40. When price reaches $49.40, the stop becomes a market order. In a calm market it might fill at $49.39. In a fast drop it might fill at $49.25, a loss of $0.75 instead of $0.60, or 1.25R. The stop price is a trigger, not a fill price. Firms also differ on what triggers a stop: some use the last trade, others the quote, so ask yours. The stop loss and take profit guide covers where the stop belongs.
Stop-limit orders: price control, but no promise of a fill
A stop-limit order combines the two. When the stop price is reached, it becomes a limit order that can fill only at the limit price or better. The stop and the limit do not have to match: a sell stop-limit might trigger at $49.40 with a limit at $49.30.
Hypothetical, same long at $50.00. If price slides from $49.45 to $49.35 tick by tick, the order triggers at $49.40 and fills between $49.40 and $49.30. If price drops from $49.45 to $49.10 in seconds, the order triggers but sits unfilled at $49.30, and you are still long while the loss grows. That is the trade-off: a stop-limit avoids a bad fill by risking no fill at all.
It often fits entries better. A buy stop-limit with a stop at $50.60 and a limit at $50.70 buys a breakout only up to $50.70; if price leaps to $50.90, you are not filled, which is a skipped trade rather than an open loss. The breakout trading strategy guide shows where such triggers belong.
Gaps: why a stop can fill far worse than the stop price
A gap is an open well away from the prior close, often after earnings or news outside regular hours. No trades happen in between, so a stop resting inside the gap triggers at the open and fills around the opening price, wherever that is.
Hypothetical: you short at $50.00 with a buy stop at $50.60. The stock closes at $50.10, then opens at $51.40 after news, as in the left panel ("gap and go"). The buy stop triggers at the open and fills around $51.40: a loss of $1.40 a share instead of $0.60, about 2.3R. A long position's sell stop does the same thing under a gap down.
Swap in a buy stop-limit with a $50.70 limit, and the order triggers but cannot fill, because price is already above the limit. In the left panel, price keeps rising and you have no exit at all. In the right panel ("gap fill"), price fades back toward the prior close and the limit might fill on the way, but that is luck, not a plan. Gaps are one reason many day traders avoid holding positions overnight. Size every trade knowing a stop can cost more than 1R; the gap trading strategy guide covers gaps in depth.
Trailing stops: a stop that follows price
A trailing stop is a stop (or stop-limit) whose price is set as a dollar amount or a percentage away from the market. As price moves in your favor, the stop follows it by that distance; when price moves against you, the stop stays put. Once triggered, it behaves like any other stop order.
Hypothetical: you buy at $50.00 with a sell trailing stop of $0.80, so the stop starts at $49.20. Price climbs to $51.50, and the stop rises to $50.70. Price then falls back; the stop stays at $50.70 and triggers there, filling near it in a calm market, for a gain of about $0.70 a share. Set the trail at $0.20 on a stock that routinely swings 30 cents, though, and normal noise stops you out on the first wiggle. Many traders size the trail from volatility; the average true range guide shows one way.
Day, GTC and extended-hours orders
Time in force sets how long an order stays live. Unless you choose otherwise, orders are usually day orders: if not filled, they generally cancel at the end of regular trading hours and do not carry over to the extended session or the next day. A good-til-canceled (GTC) order stays open until it fills or you cancel it, though each broker sets its own time limit. Some also offer immediate-or-cancel (IOC) and fill-or-kill (FOK) instructions.
A forgotten GTC order can bite. Hypothetical: a GTC buy limit at $45.00 sits for weeks. After bad earnings, the stock opens at $44.00, and the order fills at about $44.00. That is "your price or better", on news you never planned for.
US stocks trade from 9:30 a.m. to 4:00 p.m. ET in the regular session, with pre-market from as early as 4:00 a.m. and after-hours until 8:00 p.m. ET; your broker may offer less. Outside regular hours, many brokers accept only limit orders, a common practice meant to protect you from bad prices, so check yours. Liquidity is thinner, spreads are wider, and extended-hours prices may not match the next open.
Hypothetical: after earnings at 4:10 p.m. ET, a stock last traded at $80.00 is quoted $78.50 bid and $79.40 ask. A buy limit at $79.00 waits for a seller; a market order, where allowed, would pay the ask or worse. Ask your broker whether your stops are active outside regular hours and whether unfilled extended-hours orders are canceled or carried into the next session. The US stock market hours guide has the times in your city.
Bracket and OCO orders: entry, stop and target placed together
An OCO order (one-cancels-the-other) links two orders so that when one fills, the other is canceled. A bracket order goes a step further: an entry order with a take-profit limit and a stop loss attached. The two exits usually go live once the entry fills and then work as an OCO pair. Availability and exact behavior vary by broker, so try it with a small size first.
Hypothetical plan at support, after a closed bullish candle such as a hammer: buy limit at $50.00, sell stop at $49.40 under the swing low, sell limit at $51.20 just before resistance. Risk is $0.60 and reward is $1.20, a 1:2 risk/reward ratio. Risking $100, you buy $100 ÷ $0.60 = 166 shares. If the target fills, the stop is canceled and you make about $199. If the stop fills, the target is canceled and you lose about $100 plus slippage, or more through a gap.
What can go wrong: the entry never fills and price runs without you; a partial fill leaves exits sized for a different share count; canceling one leg by hand may leave the other working. Check how your platform handles each case before you rely on it.
UpTickFlow, our invite-only TradingView indicator, gives you the three numbers a bracket needs. It waits for a candle to close at a level, scores the setup from 0 to 100, shows only A+ setups and stays quiet in chop, and every signal comes with an entry, a stop and a target drawn before the trade. It does not place orders: you enter the bracket with your broker, and the decision stays yours. See how it works.
Which order for which job: a pre-order checklist
A simple map: limit orders to enter at a planned level and to take profit; buy stops or stop-limits to enter breakouts; stop orders to protect a position when getting out matters more than the exact price; and, in practice, limit orders only in pre-market, after-hours and thin stocks.
Then ask these questions while you are still flat. If any answer is no, there is no order.
- Does the higher timeframe agree? The multi-timeframe analysis guide shows how to check.
- Is price at a level that matters, such as support or resistance?
- Has the trigger candle closed?
- Are the stop (at invalidation) and the target (before the next level) set, with an order type chosen for each?
- Is the size set from the stop, so a full loss costs your fixed risk, such as 1% of the account or less? The position size calculator does the math.