How it unfolds, step by step
The setup
The selling side of an order book. That is the list of sell orders waiting at each price. Ten shares are offered at ₹100.00, twenty at ₹100.20 and fifty at ₹100.50. Three kinds of instruction can be pointed at it. A market order asks to be filled at the prices on offer. A limit order names a boundary it may not cross. A stop order does nothing until its trigger is met. Once it is met, the stop order creates a new order, and that order still has to execute on its own terms.
What happens next
A 30-share market buy takes all ten shares at the first level for ₹1,000. It then takes twenty from the second level for ₹2,004. That is ₹3,004 in total, an average of about ₹100.13. It is not the ₹100.00 on the top line. A ₹100.10 buy limit gets ten shares and no more, because the rest of the book sits above its boundary. The rest of the order stays pending, or is cancelled, depending on its validity. Now take a stop order on a position bought at ₹100, with a sell trigger at ₹95. It activates once the price reaches ₹95. If the price jumps straight past ₹95 with nothing traded in between, the next price on offer can be ₹92 or lower.
What it means — and does not
Each instruction controls one thing and gives up another. A market order controls whether the trade happens, and not the price. A limit order controls the price, and not whether the trade happens. On a sell, the limit flips meaning. It becomes the lowest price that will be accepted. A stop order controls when a second order is created, and nothing about where it fills. That is why "entry price minus stop-loss" is a planned risk figure rather than a guaranteed worst loss. And none of them shows that a fill exists at all. An order cannot create a buyer or a seller where there is none. The validity condition decides what happens to the rest. An immediate-or-cancel instruction kills the unfilled balance at once. A day order leaves it working until the session ends.
- Offer price (₹)
- Shares offered here
- Average paid for 30 shares · 100.13
Three separate offer levels: 10 shares at ₹100.00, 20 at ₹100.20 and 50 at ₹100.50. The line joining them is drawn only to show which way the price moves as the depth is used up. A 30-share market buy clears the first level and twenty shares of the second. That is ₹3,004 for 30 shares, an average of about ₹100.13. The dashed line is that average, sitting above the ₹100.00 on the top line.
Show the underlying data
| Offer level, best price first | Offer price (₹) | Shares offered here |
|---|---|---|
| 1 | 100 | 10 |
| 2 | 100.2 | 20 |
| 3 | 100.5 | 50 |
What this does not establish
This is maths on a frozen book, and a real book does not hold still. The quantity on offer changes between reading the screen and the order arriving. So the ₹100.13 average shows how the levels get used up. It does not promise a fill. The description also stops applying wherever the product or the broker does not offer that variation. Not every segment supports every order type or validity condition. Price bands, and a share that few people are trading, can stop execution outright. And a stop order can create a limit order rather than a market one. That limit order can simply stay unfilled when its boundary is out of reach.
Things to check
6For a market order, how much quantity sits at the top line, and how much only at worse prices?
For a limit order, which outcome is being accepted — a worse price, or no trade at all?
For a stop order, does it create a market order or a limit order once triggered?
Which validity condition applies — is the unfilled balance cancelled immediately, or does it keep working?
Is the quantity on screen a number of shares, a lot count, or a derivative quantity?
An order book can change while you read it. Check the depth for the quantity you need.
Common mistakes
5Reading the top of the book as the price of the whole order. The 30-share buy here averages about ₹100.13, not ₹100.00.
Treating a limit as simply safer without saying what it costs. It takes away price uncertainty and adds the chance of not trading at all.
Assuming a trigger guarantees a fill. Triggering and executing are two separate events, and a gap can sit between them.
Dividing the cost of the shares that filled by the quantity first asked for.
Comparing a last traded price with a current best offer as though they were the same measurement.
A book offers 10 shares at ₹100.00, 20 at ₹100.20 and 50 at ₹100.50. A 30-share market buy is sent. What does it pay?
- ₹100.00 a share, the price shown at the top of the book
- ₹100.50 a share, because a market order clears the whole book
- About ₹100.13 a share, because it takes all ten at the first level and twenty from the second, and those two prices are then averaged across the thirty shares
Show the answer
C. About ₹100.13 a share, because it takes all ten at the first level and twenty from the second, and those two prices are then averaged across the thirty shares
A market order is filled against whatever is on offer, level by level. So its result is an average, not a single price. The first answer is the tempting one, because the top of the book is the number a screen leads with. It is the price of ten shares, not of thirty.
Frequently asked
3Is a limit order always safer?
It puts a boundary on the execution price, and it can leave the order unfilled. That is a different risk, not the absence of one. An order that never traded in a moving market has its own cost.
Can one market order execute at several prices?
Yes. When its quantity is larger than the amount on offer at the best price, it takes the next levels too. The reported result is then an average across them.
Does a stop order limit the loss to the figure a calculator shows?
No. Charges, price jumps and execution limits can all make the actual loss larger. The calculated figure is a plan made before the event. The fill is whatever the market had available at the time.