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Foreign. Hi, I'm Andy Tempte, and welcome to Money Lessons. Join me every Saturday morning for bite sized lessons that are designed to improve financial literacy around the world. Today is March 21, 2026. Last week we explored liquidity, the force that makes stock markets work. We learned how the Buttonwood Agreement concentrated buyers and sellers specialists, helped smooth imbalances between supply and demand to keep markets orderly, and how the bid ask spread represents the price of instant liquidity. Today, we're putting that knowledge to work. Let's say you've decided to buy your first stock. What happens next? Well, before you can buy a single share, you need a brokerage account. A brokerage is simply a firm licensed to execute trades on your behalf. Think of it as the middleman between you and the stock exchange. You deposit money into your brokerage account the same way you deposit money into a bank account, and from there you can place orders to buy or sell securities. Today, opening a brokerage account takes minutes. On a smartphone, you'll provide some basic information, link a bank account, and transfer funds. Most major brokerages charge zero commissions on stock trades, a dramatic change from just a decade ago, when every trade cost between five and ten dollars and sometimes more. We covered that history in our November episode on the Journey from Trading floors to Smartphones. Once your account is funded, you're ready to trade. But here's where it gets interesting. Not all orders work the same way. Well, we're going to talk about three types of orders today, and the simplest order type is called the market order. When you place a market order, you're telling your broker, hey, buy or sell this stock right now at the best available price. Market orders execute almost instantaneously during trading hours for widely traded stocks. Remember the bid and the ask from last week? Well, if you place a market order to buy, you'll pay the ask, which is the lowest price a seller is currently willing to accept. If you place a market order to sell, you'll receive the bid which is the highest price a buyer is willing to pay. For large, heavily traded companies, market orders work beautifully. The spread is typically just a penny or two, so the price you get is very close to the price you see on your scre. But for smaller, thinly traded stocks, where liquidity is lower and spreads are wider, a market order can be risky. The price might move between the moment you tap buy and the moment your order executes. This difference is called slippage, and it's one of the hidden costs of trading in less liquid markets. The second order type is called the limit order. A limit order flips this priority. Instead of demanding immediate execution, you're setting a price boundary and telling your broker, hey, only execute this trade at my designated price or better. Let's say a stock is currently trading at $150. You think it's a good buy, but only if the price drops just a little bit. So you place a limit buy order at $145. Your order sits and it waits. If the Stock drops to 145, your order executes. If it never reaches that price, the trade never happens. You get price certainty with a limit order, but you accept the risk of missing out entirely. Limit orders work in both directions. A limit sell order at, let's say $160 tells your broker to sell only if the price rises to 160 or above. This is useful when you own a stock. You believe it has room to grow and you want to lock in a target profit without watching the screen all day. Here's what makes limit orders particularly valuable for new investors. They force you to think about price before you trade. Instead of reacting emotionally to a stock's movement and buying at whatever price the market offers, you're deciding in advance what you believe the stock is worth to you and only buying at that price or better. The third type of order is called a stop order. A stop order, sometimes called a stop loss, is designed to limit your losses. It works like a tripwire. You set a trigger price, and if the stock hits that price, your stop order automatically converts into a market order. Say you bought shares at $150, and the stock has been doing pretty well, but you want to protect your gains, so you place a stop order at 140, meaning that the stock was doing pretty well. And if it falls to 140, you want to limit your losses. If the stock does drop to 140, your stop triggers and your shares are sold at the next available market price. You've limited your downside without having to monitor the stock constantly. Now, there's an important catch with stop orders. Once a stop order triggers, it becomes a market order, which means that in a fast moving market, the actual sale price might be lower than your $140 trigger. During sharp sell offs, this gap between your stop price and your execution price can be significant. Stop orders are valuable tools, but they're not perfect guarantees. Now, beyond choosing one of these three order types, you also choose how long your order stays active. A day order, which is the default at most brokerages, expires at the end of the trading day if left unfulfilled. If you place a Limit buy at 145 and the stock never drops that low today, order simply disappears at the close. Now a good till cancel order, which is often abbreviated gtc, remains active until filled or cancelled. Most brokerages cap these at 60 to 90 days to prevent forgotten orders from executing months later at prices that no longer make sense. If you're setting a limit order at a price the stock hasn't reached yet, a GTC order lets you wait patiently for your target rather than re entering the order every morning. Now here's something that most investors really never think about. When you place a trade on your smartphone, your order doesn't necessarily go straight to the New York Stock Exchange. Your brokerage decides where to send it, a process called order routing. Your order might go to the New York Stock Exchange or to an electronic exchange like the nasdaq, or to a market making firm that executes the trade itself out of its own inventory. Brokerages make these routing decisions based on a mix of factors including speed, price, and importantly, the fees or payments that they receive from different execution venues. This practice of execution venues paying brokerages for order flow has become one of the most debated topics in modern market structure, and we'll talk about this later in the series. What matters to you as an investor is the end result. Did you get a fair price? Regulators require brokerages to seek what's known as best execution for your orders, meaning that they must use reasonable diligence to get you the best available price given current market conditions. But best execution doesn't always mean the absolute best practices price that's theoretically possible. It's a standard, not a guarantee. Now, what does all this mean for you? Choosing the right order type is one of the first real decisions you make as an investor, and it comes down to what matters most to you in the moment. Market orders prioritize speed. You want in or out now and you'll accept the market price. Limit orders prioritize price. You're willing to wait for the right number and stop orders. They prioritize protection. You want a safety net if things go wrong. For most long term investors buying shares of large liquid companies, market orders work just fine. But as you grow more confident and start trading less liquid stocks or larger positions, limit orders help ensure you're buying or or selling at prices that reflect your own analysis rather than accepting whatever the market offers in the moment. And stop orders used thoughtfully can help you manage downside risk without losing sleep. Next week we'll explore what you actually receive when you buy these shares, the rights, the privileges and protections that come with stock ownership. So until next week, I wish you grace, dignity, and compassion. My name is Andy Tempte. This is Money Lessons. You can find the show on all the major streaming services as well as out on YouTube. Please, like, subscribe, rate, and most importantly, share this public good with your friends, your family, your colleagues, and maybe a neighbor. The show was produced by Nicholas Tempte, and we'll see you next time on Money Lessons.