Order Types & Trade Execution Flashcards

What is a market order in day trading?

Answer: An order that executes immediately at the best available current price

A market order executes immediately at the best available price, prioritizing speed of execution over price certainty.

When placing a buy limit order, the order will execute only:

Answer: At the limit price or lower

A buy limit order executes only at the specified limit price or lower, ensuring the trader never pays more than their maximum acceptable price.

The 'bid' price in a stock quote represents:

Answer: The highest price a buyer is currently willing to pay

The bid is the highest price a buyer is currently willing to pay for a security; buyers compete by raising their bids to attract sellers.

Slippage in day trading refers to:

Answer: The difference between the expected execution price and the actual fill price

Slippage occurs when the actual execution price differs from the expected price, typically in fast-moving or illiquid markets where prices shift before the order fills.

A stop-loss order is primarily used to:

Answer: Limit losses by triggering a sell when price falls to a specified level

A stop-loss order automatically triggers a sell when price falls to the stop level, capping the trader's loss on a position.

A 'Day' order designation means the order:

Answer: Expires at the end of the current trading session if not filled

A day order automatically expires at the end of the current trading session (4:00 PM ET for US stocks) if it has not been executed.

An Electronic Communication Network (ECN) in day trading is:

Answer: An automated system that electronically matches buy and sell orders

ECNs are automated trading systems that directly match buy and sell orders from various market participants, often providing faster execution and tighter bid-ask spreads.