5. Orders

g. compare execution, validity, and clearing instructions;

## h. compare market orders with limit orders;

What is an order? An order is an instruction to trade.

What is a Bid price? The highest price that a buyer wants to pay for the instrument. The best bid is the highest bid in the market.

What is an Ask price? The lowest price a seller is willing to accept for the instrument. Also called offer price. The best offer is the lowest in the market.

What is the Bid-ask spread? The difference between the best bid and the best offer.

What is a market order? Market orders are simple buy or sell orders that are to be executed immediately at current market prices.

What is a limit order? A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock.

What is a day order? A day order (the most common) is a market or limit order that is in force from the time the order is submitted to the end of the day’s trading session.

What is a good-till-canceled order? A good-till-canceled order requires a specific canceling order. It can persist indefinitely (although brokers may set some limits, for example, 90 days).

What is an immediate-or-cancel order? An immediate-or-cancel order (IOC) will be immediately executed or canceled by the exchange. Unlike a fill-or-kill order, IOC orders allow for partial fills.

What is a stop order? With a stop order, your trade will be executed only when the security you want to buy or sell reaches a particular price (the stop price).

What are clearing instructions? These indicate how to arrange the final settlement of the trade. For example, which entity is responsible for clearing and settling the trade? The broker, the custodian, or the clearing house?