What is the difference between an Order and a Trade?

Question

What is the difference between an order and a trade in the context of financial services and exchanges? From what I understand, an order is an instruction to buy or sell something but trades occur where parties voluntarily agree to exchange one thing for another.

Are there any instances where an order would be considered complete but would not lead to exactly one trade or where a trade would take place but would not be the result of fulfilling orders?

This is in the context of domain modeling for a financial exchange system that may be extended in the future to be interoperable with other systems. Would it be sufficient to model a trade by mapping it one-to-one with completed orders to reduce redundancy?

Answer 1

From what I understand, an order is an instruction to buy or sell something but trades occur where parties voluntarily agree to exchange one thing for another.

Correct. A trade results from matching a buy order with a sell order.

Are there any instances where an order would be considered complete but would not lead to exactly one trade

Yes. An order can expire or be canceled without executing. Also, it can be modified (which could be implemented as canceling it and entering a new order). Also, an order can partially execute (for less than the full quantity), which leaves it in place for the remaining quantity, so one order can result in several trades.

or where a trade would take place but would not be the result of fulfilling orders?

This does not happen. A trade requires a buy order and a sell order.