How Orders Actually Work

The Four Order Types That Matter

Four order types cover 95% of what you'll use as a futures trader.

Market Order: "Fill me now at whatever price is available." Guarantees execution but not price. The difference between screen price and fill price is called slippage.

Limit Order: "Fill me at this price or better, or don't fill me at all." Guarantees price but not execution. If price never reaches your level, you don't get filled.

Stop Order (Stop Loss): "When price hits this level, send a market order." Sits inactive until triggered. Because it becomes a market order, your fill can differ from your stop price.

Stop-Limit Order: "When price hits this level, send a limit order at this other price." Protects against extreme slippage, but if price gaps past your limit, your order never fills and you're stuck in an unprotected losing trade.

The default assumption is that a stop loss guarantees you exit at your stop price. It doesn't. A stop order becomes a market order the moment your stop price is hit. In calm markets, the difference is usually a tick or two. During fast moves, news events, or overnight gaps, price can blow right past your stop level and your fill comes back significantly worse. A stop is a trigger, not a guarantee.

The four order types and their relationships: market and limit as the two fundamental types, with stop and stop-limit as their triggered variants

What Happens When You Click Buy

Your order routes from your platform to your broker to the CME matching engine, which pairs your buy order against the lowest-priced sell order in the book. Market orders match immediately. Limit orders either match instantly or sit in the book waiting.

Order execution flow: your order travels from your platform to your broker, then to the CME matching engine, where it matches with an opposing order and confirms your position

Slippage: When Price Moves Before You're Filled

Slippage is the difference between the price you expected and the price you actually got. It's a fact of life in trading, and pretending it doesn't exist will cost you.

A trader is short 1 ES with a stop 2 points above entry. CPI drops, price spikes through the stop in a single tick, and the fill comes back 1.5 points past the stop price. That's $75 of slippage on one contract, turning a planned $100 loss into a $175 loss.

Slippage Cost Calculation

Setup

Short 1 ES contract at 6,586. Stop loss at 6,588 (2 points above entry). Planned risk: 2 x $50 = $100

CPI spike: stop triggers, fills at 6,589.50

Price spikes through your stop. Fill comes back at 6,589.50 instead of 6,588. Actual loss: (6,589.50 - 6,586) x $50 = 3.5 points x $50 = $175

Slippage cost

$175 actual - $100 planned = $75 extra loss from slippage (1.5 points of slippage)

On a single trade, $75 of slippage might seem manageable. But if you trade 4 times per day and average even 1 tick of slippage per trade ($12.50), that's $50/day or roughly $1,000/month in invisible execution costs. Slippage must be factored into your risk math, not ignored.

How slippage works: a stop loss set at one price fills at a worse price during a news spike, adding unexpected cost

Minimize slippage by trading liquid markets (ES and NQ), avoiding entries during news releases, and using limit orders for entries. Accept slippage on stop losses. Getting out matters more than the exact price.

The Overnight Session

It's 2:00 AM CT. You've been watching ES on the overnight session and spot what looks like a clean setup. The spread is 2 ticks wide instead of the usual 1 tick. You want to enter long. Do you use a market order (guaranteed fill, but you'll likely pay the wider spread) or a limit order (you control the price, but risk missing the move if nobody fills you)?

What’s happening here?

In the overnight session, the order book is thinner. Fewer participants means wider spreads and less depth at each price level. Your market order might fill 1-2 ticks away from the price you saw, because there simply aren't enough resting orders to absorb your order at the displayed price. A limit order would have protected you from the slippage, but might not have filled at all if there wasn't a seller at your price. The right choice depends on how urgently you need to be in the trade.

Choosing the Right Order for the Job

This is where the Pre-Execution Protocol starts to matter. The protocol's three core questions are: what's my position size, where's my stop, and what's my directional bias. Add a fourth: what order type am I using?

Planned setup at a specific level: Limit order. Let price come to you. If it doesn't reach your level, move on.

Breakout or momentum move: Market order or stop entry. Breakouts don't wait. Accept the slippage cost.

Protecting an open position: Stop (market) order. A stop-limit that doesn't fill because price moved too fast defeats the entire purpose.

Taking profit: Limit order. You know your exit price.

Choosing Your Order Type

You've identified a support level on ES at 6,540. Your pre-market analysis says if price pulls back to that level, you want to go long with a 3-point stop. Price is currently at 6,558 and drifting lower. Do you place a buy limit order at 6,540 now and walk away, or do you wait and use a market order if you see price reach your level while you're watching?

What’s happening here?

Both approaches can work, but they have different trade-offs. A limit order at 6,540 placed now guarantees your entry price if price gets there, even if you step away from the screen. You won't pay slippage on entry. But if price reaches 6,540 and immediately bounces hard, your limit might only partially fill. A market order when you see price reach the level gets you in for sure, but you'll likely pay 1 tick of slippage ($12.50 on ES), and you have to be watching the screen at the exact right moment. For a planned setup at a specific level where you've done the analysis ahead of time, the limit order is usually the better choice. Save market orders for situations where speed matters more than price.

Key Rules

Market orders guarantee execution, not price. Limit orders guarantee price, not execution. Pick deliberately.
Stop losses must be stop (market) orders, not stop-limits. A stop-limit that fails to fill during a fast move leaves you unprotected.
Average slippage of 1 tick per trade on ES = $12.50. At 4 trades/day over 20 days, that's $1,000/month in invisible cost.
Use limit orders for planned entries at specific levels. Use market orders when speed matters more than price.
Always use a limit order for profit targets. You know the exact exit price. No reason to leave it to chance.
Factor slippage into every risk calculation. A 2-point stop doesn't guarantee a 2-point loss.

The next lesson covers the bid, the ask, and the spread, which is where order types meet the order book in real time.