LOS h: Compare and contrast market orders with limit orders.

A limit buy is placed below the current market price, but a stop buy order is placed above the current market price (stop buy orders are often placed to protect a short sale from a rising market).

The other choices are true. A well-functioning securities market includes the following characteristics:

• timely and accurate information on price and volume of past transactions.
• timely and accurate information on the supply and demand for current transactions.
• liquidity (as indicated by low bid-ask spreads).
• marketability.
• price continuity.
• depth (many buyers and sellers willing to transact above and below the current price).
• operational efficiency (low transaction costs).
• informational efficiency (rapidly adjusting prices).

A market order is an order to buy or sell a security immediately at the best available price. A limit order is an order to buy at the specified limit price or lower, or to sell at the limit price or higher. A stop order is an order to buy if the market price increases to the specified stop price, or to sell if the market price decreases to the stop price.