Market Orders
A market order is an instruction to execute a trade immediately at the best available price. Market orders guarantee execution but not price. They are typically subject to PFOF routing to wholesale market makers like Citadel Securities. For liquid stocks, market orders generally execute near the current quoted price, but during fast markets or for less liquid stocks, execution prices can vary.
Limit Orders
A limit order specifies the maximum price you will pay to buy, or the minimum price you will accept to sell. Limit orders may execute at better than your specified price but never worse. Limit orders reduce exposure to unfavorable execution prices regardless of PFOF routing. Many investors use limit orders as a practical PFOF mitigation strategy.
Stop Orders and Stop-Limit Orders
A stop order becomes a market order when the security's price reaches a specified level. A stop-limit order becomes a limit order at the stop price. Stop orders are used to limit losses or protect gains. Like market orders, they execute at market prices once triggered and are subject to PFOF routing. The execution price can differ from the stop price in fast markets.
Order Type and PFOF Interaction
Market orders — particularly for retail-size quantities in liquid stocks — are the most common target of PFOF-based routing. Limit orders routed to exchanges may bypass PFOF market makers if the limit price matches an available exchange quote. For investors concerned about PFOF, using limit orders at or slightly above/below the current market price is a practical approach.