Order types in the stock market

Every order you can send a venue is really answering two questions at once: how certain do you need to be that you get a price you specify, and how certain do you need to be that you get filled at all, and every order type trades one against the other.

What are the main order types?

• Market order. "Fill me now, at whatever price it takes." Certainty of execution is total (assuming any liquidity exists at all); certainty of price is zero, a market order for any real size walks the book (Exercise 2: walking the book), and the larger the order relative to displayed depth, the worse its average price gets. Cheap in decision-making, potentially expensive in dollars.
• Limit order. "Fill me at this price or better, or don't fill me at all." Certainty of price is total (you never pay worse than your limit); certainty of execution is zero, it may never fill, or only partially, if the market never reaches your price. An unfilled limit order rests in the book and becomes part of the displayed liquidity other traders can hit.
• Marketable limit order. A limit order priced aggressively enough to cross the current spread immediately (e.g., a buy limit at or above the current best ask), it behaves like a market order in the ordinary case, but caps your worst-case price if the market gaps violently between when you decided and when your order arrives. Most professional "market orders" in practice are actually marketable limits, precisely for this protection.
• Stop order (stop-loss). Dormant until the market trades at or through a trigger price, at which point it becomes a market order. Used to cap a loss or lock in a gain without watching the screen continuously, but because it converts to a market order at exactly the moment the market is already moving against the position, a stop can execute at a materially worse price than its trigger during a fast, thin market (a stop run, sometimes made worse when many traders' stops cluster at the same visible technical level and cascade together).
• Stop-limit order. Like a stop, but converts to a limit order (not a market order) once triggered, it bounds the worst price you'll accept, at the cost of the same risk every limit order carries: in a genuinely fast market, it may not fill at all, leaving you exposed exactly when you were trying to reduce exposure.
• IOC (Immediate-Or-Cancel). Fill whatever quantity is available right now, at your price or better; cancel whatever's left. Never rests in the book, useful for probing available liquidity without leaving a visible resting order behind.
• FOK (Fill-Or-Kill). Fill the entire requested quantity immediately, or cancel the whole order, no partial fills allowed. Used when a partial fill would be worse than no fill at all (e.g., one leg of a paired trade).
• GTC (Good-Til-Cancelled) vs. Day. Not about price or fill certainty at all, but about how long a resting limit order persists, through the current session only (Day) or until explicitly cancelled (GTC).
• Iceberg / hidden (reserve) order. Displays only a small slice of a much larger total size in the book; as the visible slice fills, a fresh slice of the same size is automatically replenished from the hidden reserve. The entire point is information control, a resting order for the true full size would signal your intent to every other participant watching the book, inviting them to trade ahead of you.
• Pegged order (e.g., midpoint peg). Its price is not fixed but automatically tracks a reference (commonly the current midpoint between best bid and best ask), letting an order stay passive and price-improving without the sender having to manually re-quote every time the market moves.

Notice the thread: every execution algorithm in this module (TWAP, VWAP) is, mechanically, a scheduler that decides when and how large to send a sequence of these smaller child orders (usually IOC or marketable-limit slices, sometimes with iceberg or pegged behavior on the resting portion) rather than one giant market order. Order types are the vocabulary; scheduling algorithms are the grammar.

How does price-time priority work?

A quick word on priority. Within a single price level, the overwhelming majority of equity markets (both NSE/BSE in India and NYSE/Nasdaq in the US) use price-time priority, often shortened to FIFO at a level: the best price always trades first, and among orders at the same price, the one that arrived earliest fills first. (Some derivatives markets use pro-rata priority instead (fills at a price level are split proportionally to order size rather than strictly by arrival order) worth knowing exists, out of scope to implement here.) Price-time priority is exactly why a resting order's age at a price level has real value: a fresh limit order at the best price stands behind every order that got there first, however briefly.