A waiter asks you what you want for dinner. You say, "whatever you think is best." You figure...he's the expert. He works at the restaurant every day. He's tasted all the food...or at least seen it all get made. He's in a better position than you to decide what meal is the tastiest.
That’s the food equivalent of a not-held order.
The financial equivalent involves an investor giving their broker wide leeway in buying stocks (or other securities) on their behalf. Basically, you tell your broker, "whatever you think is best."
The not-held order gives your broker the ability to pick the time and price at which to fill the order. You might say, "Get me 100 shares of AMZN." If it's a not-held order, the broker can than wait to pick the best spot to buy the 100 shares. So you might not get the shares at the current market price; the trader might wait for a better time to get the stock at a better price.
With a not-held order, the broker isn't liable for any mistakes they might make. If they think they can get a better price by waiting, and shares go up in the meantime, you can't sue them for missing out on the lower price. You put your faith in them, and you have to trust that they did the best they can. (Unless, of course, you can prove actual negligence or fraud...but if they made a good-faith effort to get you the best price, they aren't liable for an adverse turn of events.)
Related or Semi-related Video
Finance: What is a market order?3 Views
Finance a la shmoop what is a market order? alright people it's a type of buy
or sell order which simply says I will buy or sell this stock or bond at this
price right now that is whatever price the market is telling me it's worth [Investor discussing market orders]
right now that's my price so the market prices change all the time and yes of
course the broker can choose to look at his screen this minute or that minute or [Broker looking at computer screen]
the following minute and the market will be changing if you're placing the order
during the day so yes there is some discretion in defining exactly what
dollar amounts and penny amounts a market order means but in real life
usually through online portals or even through old-school telephones yes those [Person using an old-style telephone]
things the broker will say something like yep I see coca-cola quota here at
42.48 that's market right now you want it and if you want to sell well then you [Woman selling bonds while on the phone]
mumble something like go ahead and just so you know the kissing cousin of a
market order is a limit order like an investor might tell the broker give me a
42.50 limit on that coke sale if the stock never hits 42.50 like it's
below at 42.49 doesn't do it well then no sale ever happens and the [Coca cola stock price graph stamped with no sale]
owner of those coca-cola shares well they just keep them if the stock
suddenly pops and it gets there then blam the shares have been sold well in
practice most relatively sophisticated buyers and sellers put in limits like
limit orders not just naked market orders even if they are below what the
market currently floats because flash crashes happen all the time it seems
these days and in one fleeting moment shares of coca-cola could suddenly [Coca cola share price drops]
plummet to 34.12 a share and if the seller has a market order in while those
shares will transact or be sold at 34.12 even though 15 minutes later the markets
back to its 42.50 a share pricing so you can get really heard if you rely on
the market being a stable and rational so vanilla pure market orders can be a [Man with pigs head riding a bike]
dangerous thing be careful just ask the little piggy you know who went to market
Up Next
An unsolicited order is an order to buy or sell a security demanded by the client.
What is a limit order, and how can we be sure we never have one of those in place when we go to a doughnut shop?