Placing an order

Pressing buy sends an instruction, and the instruction has two parts: how many, and on what terms. The second part is the one worth understanding.

A market order

"Buy me 100 shares now, at whatever price the market has."

It executes almost immediately, at the best prices currently available on the other side of the book. You are choosing certainty of execution over certainty of price.

In a heavily traded stock, that is usually fine — the best sell price and the next one are a rupee apart, and you will not notice.

In a thinly traded one it can be brutal. If only 40 shares are offered at ₹500 and the next 200 are at ₹540, a market order for 100 shares takes the 40 and then pays ₹540 for the rest. Nothing malfunctioned. You instructed the exchange to accept any price, and it did.

A limit order

"Buy me 100 shares, but pay no more than ₹500."

It executes only at your price or better. If nobody sells at ₹500, it sits in the order book waiting, and may never execute at all.

You are choosing certainty of price over certainty of execution.

The cost is not theoretical either: an order that never fills means you did not buy something you wanted to own, and if the price ran away, that omission is real.

Which to use

The useful rule, and it is about the stock rather than about you:

Liquid stock, ordinary size, and you want to own it → market order is fine. The spread is small and waiting achieves little.

Thin stock, large order, or a specific price in mind → limit order. This is the case where a market order can cost several per cent instantly.

Anything during the opening minutes, or right after news → limit order. Prices move fastest exactly when a market order is most likely to catch a bad one.

Chapter 7 is about reading the spread, which is how you tell those situations apart before you trade rather than afterwards.

Stop-loss orders

A conditional instruction: "if the price falls to ₹450, then sell."

It sits dormant until the trigger, at which point it becomes a live order — a market order in the basic form, which means the two things combine in exactly the way you would not want on a fast-falling day: your sell is triggered by a fall and then filled at whatever price exists in the chaos.

This site does not tell you whether to use one. It does tell you what it is: an instruction that removes your judgement at the moment it is triggered, in exchange for not having to be watching.

What happens after you press the button

1. Your broker validates it — enough money, enough shares, price within the day's permitted band. Chapter 9 covers those bands.
2. It reaches the exchange and enters the order book.
3. It matches, or waits, or expires at the end of the day.
4. You get a confirmation with the executed price and quantity.
5. The trade settles the next day. Chapter 6 follows that part.

Between steps 4 and 5, you have bought the shares but do not yet hold them. That gap is normal and is the subject of the next chapter.

Two details that surprise people

A single order can execute at several prices. Ask for 500 shares and you may get 200 at one price and 300 at another, because that is what was available. Your confirmation shows the average.

An order can be partly filled and then sit. A limit order for 500 might fill 180 and wait for the rest, and you own 180 shares in the meantime.

The point

A market order buys certainty of execution and pays for it in price. A limit order buys certainty of price and pays for it in execution. The stock's liquidity decides which cost is worth paying, not your confidence about the price.