This is the most common futures order type simply because it is the most convenient. A market order initiates the futures trade at the current market value by filling the order at the best possible price at that particular time. This means that you will be taking the bid price if you are selling the commodity contract, and taking the ask price if you are buying it. Keep in mind that a market order guarantees that your order will be filled but it doesn't guarantee that you will be happy with the price.
This futures order type initiates the trade at a specific price "or better" if possible. “Or better” is the key here. If the order is to buy a futures contract, “better” is equivalent to a lower price; if the order is to sell a futures contract, “better” is equivalent to a higher price. For example, entering an order to buy 1 August Soybean futures contract at $11.05 means the trader will only accept being long from $11.05 or less. In essence, traders use market orders if they prefer to get filled over receiving a certain price; if the priority is to receive a particular price, or better, a limit order should be used.
Seasoned traders know the market might hit the limit order price without the trade necessarily being executed. This is because of the bid/ask spread, and the fact that limit orders are filled on a first come, first serve basis. If there are 100 traders working a futures limit order at the same price, the earliest orders to be filled are those that put their order in first. Further, if the market peaks or troughs at the limit price not all 100 orders typically get filled because there might not be enough traders willing to take the other side of the trade at that price.
Accordingly, a limit order is only guaranteed a fill if the futures contract price trades at least 1 tick beyond the limit order price. For this reason, it is often said in the business that it "has to go through it to do it".
Simply put, if you have an order to sell the mini-sized Dow at 17,250 and that price is the high of the day, your order may, or may not, have been filled; but if the high of the day is 17,251 you are owed a fill.
Stop Order (AKA Stop Loss)
This order becomes a market order only when the specified price level is reached. This can mean that the futures market trades at the stop price, or the stop price has become part of the bid/ask spread. A commodity buy stop order is placed above the current futures market price, and a sell stop is placed below the current futures market price. In any case, a stop loss order is subject to the possibility of slippage on the fill. In other words, your fill price may be different that the stop price that you had originally named.
Fill slippage occurs because the stop loss order becomes a market order, it is not an “or better” order. Futures stop loss orders are most commonly used to “stop the loss” of a speculative position gone bad. For instance, a trader long December Corn futures from $5.00 might place a sell stop order at $4.80 to liquidate the position should the market go against the original speculation by 20 cents. Once again, slippage is possible. Simply placing a stop loss order at $4.80 doesn’t guarantee a fill at that price. The reported fill might be $4.79, or much lower depending on market conditions, volatility, and potential price gaps from the market closing price in one session to the opening price of the next. Nevertheless, in today’s electronic markets slippage is typically minor.
A stop loss order can also be used to enter a commodity market. If a trader believes a futures market might continue to rally once it breaks technical resistance, he could place a buy stop order to enter the market with a long position if prices rally to your stated price. To illustrate, if crude oil futures are trading at $62.00 per barrel, and you believe a break above $63.00 could open the door for a large rally, it might make sense to place a buy stop at $63.10. This order would execute a long futures contract for the trader if $63.10 is reached. If the commodity price never reaches the stop loss level of $63.10 the order will not be filled.