Limit orders

Limit order books contain, by definition, limit orders; each a public commitment to buy or sell a quantity and a given price. All trading can be done with limit orders alone. However, all exchanges offer another order type, the market order, the execute against limit orders on the opposite side of the order book, irrespective of price. In the limit order books for many highly traded stocks, market orders are dangerous; they do not limit the price paid by the trader and are difficult to place when orders are rapidly being placed and executed. Some traders now never execute with market orders.

The exchanges have inevitably added more order types to make their facilities more attractive to members. Below is an example from the London Stock Exchange SETS order book;

Trading periodPartialUnfilled remains
AuctionContinousPriceQuantityfill?on the book?
At best
Execute and eliminate
Fill or kill[◊]

For the pan-European or global execution trader, the picture becomes more complex as the economics of trading with the different order types vary between exchanges. In the US market orders typically have lower commission rates than limit orders; on the London Stock Exchange market order executions charges are higher than limit order execution charges; on the Euronext limit order books, execution charges are the same for both market orders and limit orders.