Start with understanding
Investing Basics
Understand a little. Practice once. Write your own plan. Each lesson explains an idea with an example, then asks you to answer a question and write a short reason before reading the explanation. Gather your thoughts as you learn, then follow the prompts to write your own learning or investment plan.
Read and practice first. Sign in to save personal plans and records.
Sign in to save progressAbout 5 minutes
05 · Quotes are not executions
What you’ll learn
Understand why the quote you see can differ from the trade you get.
Placing an order asks a broker to buy or sell; execution means a trade actually occurs. A market order generally seeks prompt execution at available prices without guaranteeing a price. A limit order sets the highest buying price or lowest selling price you will accept, but may not fill.
Liquidity is about how readily trades can happen at nearby prices. The difference between an expected and actual execution price is often called slippage. Trading hours, order size, sudden price changes, and fees can all affect the final result.
See it in an example
Suppose the highest bid is 99 and the lowest ask is 100. The gap of 1 is the bid–ask spread. If your buy limit is 99 and no seller accepts it, your order may remain unfilled. The last traded price only tells you where the most recent trade happened.
Market order
- Plain meaning
- A market order seeks to buy or sell at currently available prices. It generally prioritizes prompt execution without a price ceiling or floor; a changing market can change the price you receive.
- See it in an example
- The last displayed trade is 100, but available sellers are at 101 when your order arrives. A market buy may fill at 101, or in several pieces at different prices.
- When would I use this?
- When learning about orders, separate execution timing from price limits. Check the rules of the relevant market and broker too.
- Common misconception
- The last displayed price records a past trade. It does not guarantee the price of your next order.
Limit order
- Plain meaning
- A limit order sets a price boundary. A buy limit is the most you will pay; a sell limit is the least you will accept. A fill may be more favorable, but there may be no fill at all.
- See it in an example
- A hypothetical buy limit is 100 while available sellers ask 102. The order will not buy at 102. Even a quote at 100 may not produce a fill because of limited quantity or queue position.
- When would I use this?
- Distinguish submitted, partially filled, fully filled, and canceled order states. Successful submission does not mean a completed trade.
- Common misconception
- A limit constrains an acceptable fill price. It guarantees neither execution nor protection against losses after a purchase.
Bid–ask spread
- Plain meaning
- The best bid is the highest available buying price; the best ask is the lowest available selling price. Their difference is the bid–ask spread, one part of understanding trading costs.
- See it in an example
- With a bid of 99 and ask of 100, the spread is 1. In a simplified unchanged market, buying at the ask and immediately selling at the bid leaves a difference of 1 per share before other fees.
- When would I use this?
- Read bid and ask prices alongside the quantities available. Session and order size can also affect actual costs.
- Common misconception
- Zero commission removes one category of charge, not costs such as the spread.
Liquidity
- Plain meaning
- Liquidity describes how easily an asset can be traded promptly near current market prices. Available quantity, the bid–ask spread, and order size all affect the experience.
- See it in an example
- Suppose you want to sell 100 shares but only 10 shares are wanted at the best bid. The rest may need to wait for buyers or trade at lower prices; one quote does not cover every quantity.
- When would I use this?
- Study trading conditions during normal and unusual sessions, and how a larger order might behave.
- Common misconception
- Active trading yesterday does not guarantee easy selling today. Liquidity can change with market conditions.
Use what you just learned to answer a question
Choose the answer you think fits and write a short reason in your own words. Then submit to see the answer and explanation and check your understanding.
Try this for yourself
Write one sentence each about what a market order cannot guarantee and what a limit order cannot guarantee. Use those questions to guide further reading about trading rules.
06 · Results, valuation, and expectations
Explore further
Learning and research support; no personal trade instructions or guaranteed returns. · Version 2026-09-13.1