1.12 TRADING IN THE MARKETS
Market making refers to the activity of posting a bid (a price at which you are willing to buy) and an ask (a price at which you are willing to sell).
Type of orders
There are several different types of orders for financial markets. These are distinguished primarily by whether or not they specify a price and how long they last.
A market order is a buy or sell order, and takes the form "buy 1,000 shares of Company X." Your broker's job is to buy the stock at the best possible price.
A limit order stays on the books until it is filled. For example, it could say "buy 1000 shares of Firm X for no more than $10 each." In this case, the order will be filled only when someone is willing to sell the shares for no more than $10.
Various time limits can also be specified, and the names given are for the most part self-explanatory. Such orders include "fill or kill" orders, "good till canceled" orders, and "day orders," which are good only on the day they are issued.
Another type of order is a stop-loss order; this is similar to a limit order, and specifies that the order becomes a market order when the price reaches a certain level.
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