By the end of this lesson you understand what happens between sending an order and having the trade settled, and what role the broker and the market play in that process.
\nWhen you send an order, your broker isn't the one buying from or selling to you directly -- its role is to transmit your order to the market, where a real counterparty is found: someone willing to do the opposite trade to yours (a seller if you're buying, a buyer if you're selling).
\nWhen the market finds that counterparty and the price matches -- depending on the order type you used, see the previous lesson -- the trade is considered executed: both parties have agreed to the exchange. But execution isn't the same as settlement.
\nSettlement is the subsequent process in which ownership of the securities and the corresponding money is formally transferred between the buyer's and seller's accounts, handled by a clearinghouse. This process isn't instantaneous -- it traditionally takes a couple of business days after execution, though the exact timeframe varies by market. While a trade is executed but not yet settled, for practical purposes it's already considered yours -- you could even sell it again -- but formally, the change of ownership hasn't been completed yet.
\nYou send a market order to buy shares on a Monday morning: it executes almost instantly, as soon as the market finds a seller at the best available price. Actual settlement -- the formal transfer of the securities and money between accounts -- completes a few days later, not at the exact moment of execution.
\nAn order goes from the broker to the market, where it executes once a real counterparty is found at the right price, and it settles -- with the formal transfer of securities and money -- a few days after that execution.
\nWhat's the difference between an order executing and it settling?
\nIs the broker the counterparty to your trade? Why or why not?
","sortOrder":2,"readingMinutes":5,"difficulty":"Básico"},"previous":{"id":14,"moduleId":5,"slug":"what-order-types-exist","title":"What order types exist for buying or selling?","summary":"You distinguish a market order, a limit order, and a stop order, and understand what each one controls: price or certainty of execution.","bodyMarkdown":"## Objectives\n\nBy the end of this lesson you distinguish a market order, a limit order, and a stop order, and understand what each one controls: price or certainty of execution.\n\n## Content\n\nAn order is the instruction you give your broker to buy or sell an asset, specifying what you want, how much, and under what conditions. Not all orders behave the same way -- the main difference between the three basic types is what they prioritize: certainty that the trade will happen, or control over the price at which it happens.\n\nA **market order** executes immediately at the best price available at that moment. It prioritizes certainty of execution above everything else: you know the trade will happen, but you don't know exactly at what price until it has already executed. In liquid, stable markets the difference is usually minimal; in volatile or illiquid markets, it can be significant.\n\nA **limit order** does just the opposite: you set in advance the maximum price you're willing to pay (if buying) or the minimum price you'll accept (if selling), and the order only executes if the market reaches that price or a better one. It prioritizes price control over certainty -- if the market never reaches that level, the order simply doesn't execute, and it can remain pending indefinitely.\n\nA **stop order** is conditional: it stays inactive until the price reaches a trigger level you define, and at that point it activates and starts behaving like a market order. It's mainly used to limit losses -- for example, automatically selling if the price falls below a threshold you're no longer willing to tolerate -- or to protect gains already made without having to watch the price constantly.\n\n## Example\n\nIf you want to buy right now, regardless of the exact price at that instant, you'd use a market order. If you only want to buy if the price drops to a specific level you consider attractive, you'd use a limit order. If you already hold a position and want to sell it automatically if the price falls below a level you'd mark as an unacceptable loss, you'd use a stop order.\n\n## Common mistakes\n\n- Thinking a limit order always ends up executing -- it can remain pending indefinitely if the market never reaches that price.\n- Confusing a stop order with a limit order -- the stop activates at a trigger price and, once activated, behaves like a market order without guaranteeing the final price; the limit does directly set the maximum or minimum acceptable price.\n\n## Summary\n\nThe three basic order types balance certainty of execution and price control differently: the market order prioritizes certainty, the limit order prioritizes price, and the stop order activates conditionally to limit losses or protect gains.\n\n## Self-check\n\nWhat order type would you use if you want to buy right now, regardless of the exact price?\n\nWhy can a limit order end up never executing?","bodyHtml":"By the end of this lesson you distinguish a market order, a limit order, and a stop order, and understand what each one controls: price or certainty of execution.
\nAn order is the instruction you give your broker to buy or sell an asset, specifying what you want, how much, and under what conditions. Not all orders behave the same way -- the main difference between the three basic types is what they prioritize: certainty that the trade will happen, or control over the price at which it happens.
\nA market order executes immediately at the best price available at that moment. It prioritizes certainty of execution above everything else: you know the trade will happen, but you don't know exactly at what price until it has already executed. In liquid, stable markets the difference is usually minimal; in volatile or illiquid markets, it can be significant.
\nA limit order does just the opposite: you set in advance the maximum price you're willing to pay (if buying) or the minimum price you'll accept (if selling), and the order only executes if the market reaches that price or a better one. It prioritizes price control over certainty -- if the market never reaches that level, the order simply doesn't execute, and it can remain pending indefinitely.
\nA stop order is conditional: it stays inactive until the price reaches a trigger level you define, and at that point it activates and starts behaving like a market order. It's mainly used to limit losses -- for example, automatically selling if the price falls below a threshold you're no longer willing to tolerate -- or to protect gains already made without having to watch the price constantly.
\nIf you want to buy right now, regardless of the exact price at that instant, you'd use a market order. If you only want to buy if the price drops to a specific level you consider attractive, you'd use a limit order. If you already hold a position and want to sell it automatically if the price falls below a level you'd mark as an unacceptable loss, you'd use a stop order.
\nThe three basic order types balance certainty of execution and price control differently: the market order prioritizes certainty, the limit order prioritizes price, and the stop order activates conditionally to limit losses or protect gains.
\nWhat order type would you use if you want to buy right now, regardless of the exact price?
\nWhy can a limit order end up never executing?
","sortOrder":1,"readingMinutes":5,"difficulty":"Básico"},"next":{"id":16,"moduleId":5,"slug":"what-costs-and-fees-does-trading-involve","title":"What costs and fees does buying or selling involve?","summary":"You recognize the costs of trading beyond the broker's visible commission: the spread and, depending on the case, custody or currency-conversion fees.","bodyMarkdown":"## Objectives\n\nBy the end of this lesson you recognize the costs of trading beyond the broker's visible commission: the spread and, depending on the case, custody or currency-conversion fees.\n\n## Content\n\nThe most visible cost of buying or selling is the brokerage commission: what your broker charges to execute the order, either as a flat amount, a percentage of the amount traded, or a combination of both. It's the cost that shows up explicitly in your broker's information, and the one most compared when choosing one.\n\nBut it isn't the only real cost. The **spread** is the difference between the price at which you can buy an asset at that instant and the price at which you can sell it -- the market always offers two slightly different prices, not just one. That spread is always paid whenever you buy or sell, even though it never appears as a separate cost line in any summary: if you bought and immediately sold the same asset without its \"market\" price having moved, you'd already lose money purely from that difference.\n\nDepending on the broker and the market, other less obvious costs can add up: custody fees for holding the securities in your account, or currency-conversion fees if the asset trades in a currency different from your account's. None of these costs is necessarily large on its own, but it's worth considering them together, not just the explicit commission, to understand the real cost of a strategy.\n\nThese costs matter especially in two situations: trading frequently, because each individual trade pays its own cost and these add up; and trading with small amounts, because a flat commission weighs proportionally more the smaller the trade amount.\n\n## Example\n\nQuickly buying and selling the same stock, with its market price unchanged between one trade and the next, can result in a net loss purely from the spread and the two brokerage commissions -- even though, at first glance, \"the price hasn't moved.\"\n\n## Common mistakes\n\n- Focusing only on the broker's explicit commission and not considering the spread -- the spread is always paid whenever you buy or sell, without appearing as a separate cost line.\n- Thinking that trading more frequently doesn't add any extra cost beyond time -- each trade pays its own commission and its own spread, so trading more often multiplies the total accumulated costs.\n\n## Summary\n\nBuying or selling has an explicit cost -- the brokerage commission -- and less visible costs, like the spread and, depending on the case, custody or currency-conversion fees, which are worth considering together to understand the real cost of trading.\n\n## Self-check\n\nWhy can immediately buying and then selling the same stock result in a loss even if the price hasn't changed?\n\nWhy does trading more frequently increase total costs, beyond the visible commission on each trade?","bodyHtml":"By the end of this lesson you recognize the costs of trading beyond the broker's visible commission: the spread and, depending on the case, custody or currency-conversion fees.
\nThe most visible cost of buying or selling is the brokerage commission: what your broker charges to execute the order, either as a flat amount, a percentage of the amount traded, or a combination of both. It's the cost that shows up explicitly in your broker's information, and the one most compared when choosing one.
\nBut it isn't the only real cost. The spread is the difference between the price at which you can buy an asset at that instant and the price at which you can sell it -- the market always offers two slightly different prices, not just one. That spread is always paid whenever you buy or sell, even though it never appears as a separate cost line in any summary: if you bought and immediately sold the same asset without its "market" price having moved, you'd already lose money purely from that difference.
\nDepending on the broker and the market, other less obvious costs can add up: custody fees for holding the securities in your account, or currency-conversion fees if the asset trades in a currency different from your account's. None of these costs is necessarily large on its own, but it's worth considering them together, not just the explicit commission, to understand the real cost of a strategy.
\nThese costs matter especially in two situations: trading frequently, because each individual trade pays its own cost and these add up; and trading with small amounts, because a flat commission weighs proportionally more the smaller the trade amount.
\nQuickly buying and selling the same stock, with its market price unchanged between one trade and the next, can result in a net loss purely from the spread and the two brokerage commissions -- even though, at first glance, "the price hasn't moved."
\nBuying or selling has an explicit cost -- the brokerage commission -- and less visible costs, like the spread and, depending on the case, custody or currency-conversion fees, which are worth considering together to understand the real cost of trading.
\nWhy can immediately buying and then selling the same stock result in a loss even if the price hasn't changed?
\nWhy does trading more frequently increase total costs, beyond the visible commission on each trade?
","sortOrder":3,"readingMinutes":5,"difficulty":"Básico"},"pathContext":null,"curatedLinks":{"prerequisite":[],"continuation":[],"related":[]},"relatedConcepts":[{"concept":{"id":19,"slug":"trade-settlement","term":"Trade settlement","shortDefinition":"The process, after an order executes, in which ownership of the securities and the corresponding money is formally transferred between buyer and seller.","longDefinition":"Executing an order (finding a counterparty and agreeing on the trade) is not the same as settling it. Settlement is the subsequent process, handled by a clearinghouse, in which the actual transfer of securities and money between buyer and seller accounts is completed. It isn't instantaneous -- traditionally it takes a couple of business days after execution, though the exact timeframe varies by market."}}]}