3.1 Order Types & Market Instructions
Order types dictate how broker-dealers route and execute customer instructions on secondary markets.
Key FINRA Exam Takeaways
- Market Order: Executed immediately at current market price; guarantees execution, NOT price.
- Limit Order: Executed only at specified price or better; guarantees price, NOT execution.
- Stop Order: Inactive until the stop price is triggered, then becomes a Market Order to execute immediately.
- BLiSS Rule (Below Market): Buy Limits and Sell Stops placed below current market price.
- SLoBS Rule (Above Market): Sell Limits and Buy Stops placed above current market price.
Knowledge Checkpoint • Section 3.1
An investor who owns stock currently trading at $55 wishes to automatically sell the shares if the price falls to $50 to prevent further losses. Which order should the investor place?