What it is

Buying or selling a share is a short journey that moves from you to your broker to the exchange and back. Understanding that path removes most of the mystery from trading. The instruction you send is called an order - a request to buy or sell a specific security at specific terms.

The broker is the licensed intermediary that carries out this instruction. You never hand cash directly to the seller; instead, the broker holds your account, receives your order, and executes it on the market on your behalf. In return the broker may charge a commission or earn from the small gap between buying and selling prices.

How it works

When you place a trade, you choose how the order should behave. The two most common types are:

• A market order, which executes immediately at the best price currently available. It prioritises speed of execution over price certainty.
• A limit order, which executes only at a price you specify or better. It prioritises price control over the certainty of getting filled.

Every order interacts with two live prices: the bid price (the highest price a buyer is willing to pay) and the ask price (the lowest price a seller will accept). The difference between them is the bid-ask spread, a basic cost of trading. A market buy typically fills near the ask; a market sell typically fills near the bid.

Once your order is matched with a counterparty, the trade is executed. But you do not own the shares the very same instant the price prints. There is a short administrative step called settlement, during which the shares and the cash actually change hands and ownership records are updated. In many markets this completes one business day after the trade.

1. You send an order to your broker.
2. The broker routes it to the exchange.
3. The exchange matches it with a counterparty and the trade executes.
4. Settlement transfers the shares and cash, finalising ownership.

How to use it

For your first trades, knowing these terms helps you read the confirmation screen with confidence: which security, how many shares, the order type, the price you were filled at, and when settlement completes. A clear mental model of this flow makes later topics - like stop orders and slippage - far easier to absorb.

Key takeaway: An order travels from you to your broker to the exchange; a market order trades immediately at the best available price while a limit order waits for your price; and settlement is the short step afterward that finalises who owns the shares.