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Stock Market Term 5 -
Market Order – A market order is an order to buy or sell a stock that will be executed on a stock exchange. When you place an order with your broker that includes no other conditions, that's an example of a market order. You agree to buy or sell a stock at what ever the market price is when the trade is executed. Due to the time difference between when the trade is requested and when it's executed, there can be substantial difference in the price you buy or sell a stock at compared to where you wanted to buy or sell at.

For example, if you're looking at a stock on your computer screen and it's sitting at $20.00 a share, it may have moved to $21.75 from the time you place the order to the time a trader actually buys the stock for you on the exchange. Remember that stock exchanges are just markets filled with buyers and sellers. The price offered and the price that sellers are willing to sell for changes constantly as the trading day progresses.

Stock Market Term 4 -
Limit Order – As the name suggests a limit order is an order to buy or sell some stock that's limited by price. There are buy limit orders and sell limit orders. When you place a limit order, the transaction can only occur when the stock's price reaches, but doesn't exceed a certain price. This can occur either on the high or low side.

For example, you want to buy some shares of XYZ Corp. (You just love that company) and it's currently trading at $10.00 per share. You can place a limit order that will not be executed if the stock is trading at greater than $12.00 at the time the order is executed. That prevents you from paying more than you wanted to for the stock, which can easily occur with a fast moving stock due to the lag between the time your order is placed and when the trade is actually executed on the stock exchange.

You can also use a limit order when selling. Say you're holding XYZ Corp at $10.00 per share. You can place a limit order to sell your shares but set a limit at some amount, say $8.50, below which you don't want the trade to be executed. If XYZ falls below $8.50 before the trade can be executed, the transaction won't be made.

Stock Market Term 3 -
Stop Order – The stop order is basically the flip side of the limit order. With a stop order, you set what's called a “stop price”. When the stock reaches your selected stop price the trade will be turned into a market order, not before. As with the limit order, there are sell stop orders and buy stop orders. These are great for locking in profits or limiting losses.

For example if an investor is holding XYZ at $10.00 per share, they can set a sell stop order at $9.00/share. That way if the stock drops to $9.00 it will trigger a market order to sell. If the investor (you?) bought the stock at $7.00 they are locking in the $2.00 per share appreciation as profit. Keep in mind that they may not receive the entire $2.00 due to the time difference between when the market order is placed and when the trade is executed.

Stock Market Term 2 -
Stop–Limit Order – If you really aren't comfortable with the market fluctuations that can cause your trade to be executed at a price above or below your stop or limit order, you need to use what's called, appropriately enough, a “stop–limit order”. The stop-limit order is a marriage of both types of orders. As with the stop order you set a stop price. The difference is that the when the stop price is reached the order converts to a limit order, rather than a standard market order.

Why wouldn't you always use a stop-limit order? Well sometimes you can't, because your broker prohibits it with certain classes of stocks, such as over the counter bulletin board (OTC-BB) stocks. When they allow you to place these orders should be clearly spelled out in their service terms. The other reason you may not want to use a stop-limit order is that, as with a standard stop order, if the price of the stock never reaches the limit, your trade will not be executed.

Stock Market Term 1a -
Ask – You'll see the term “ask” on your computer screen when looking at different stocks and their activity. The Ask amount is what the seller of the stock is willing to sell it for.

Stock Market Term 1b -
Bid – Bid is the flip side of Ask. It's what the buyer is offering to pay for a specific stock.

That wraps up the top 10 stock market terms you need to know. There are hundreds more terms that are used by investors, brokers, and traders. Like lawyers, they have a language that is all their own. I'll post the definition of more stock market terms in the near future.