An order type--whether placed online or through a broker-- is the way one enters or exits a position in a stock, bond or commodity market. It can range from simple, such as a market order, to relatively complex, such as a trailing stop limit order.

Benefits

Investors choose specific order types to maximize profit and limit risk. Placing a market order for a stock means that a trade is immediately executed at the current market value. A stop or limit order, meanwhile, provides the investor a means of requesting a specific price.

Significance

A stock has an ask price, which is the price at which sellers are offering the stock, and a bid price, which is the price at which buyers are offering to pay. Using stop and limit orders allows individual buyers and sellers to name the price at which they wish to trade. There is, however, no guarantee that market forces will drive a given stock, bond or commodity to the requested price.

Types

While market, stop and limit orders are the most common types, more sophisticated order types include buy stop limit, buy to cover stop, sell short limit, buy to cover limit, sell short stop and sell stop limit.

Time Frame

Most online trading platforms allow investors to place stop and limit orders that are good until the end of the trading day or good until they are canceled--which generally has a 60-day limit.

Warning

While online trading can be fun and exhilarating, it is strongly recommended that novice investors spend ample time researching the ins and outs of order types before diving in.

Source:

Stock Market Investors: Stock Trading Basics and Order Types

TradingMarkets.com: Place Your Bets: Order Types For Stock Trading

thinkorswim: Stock/Options order types supported by thinkorswim