HomeDictionaryMarket Order

Market Order

A market order is an instruction given by an investor to buy or sell a security at the current market price. When a market order is placed, the order is executed as quickly as possible at the prevailing market price, ensuring a prompt execution but without guaranteeing a specific price.

What You Need To Know

Market orders are typically used when speed of execution is more important than the exact price at which the trade is executed. Because market orders do not specify a specific price at which the trade should be executed, they are subject to price slippage, which means the executed price may differ slightly from the expected or displayed price at the time the order was placed. Market conditions and liquidity can impact the extent of price slippage.

Market orders are particularly susceptible to price volatility, especially in fast-moving or illiquid markets. The execution price can deviate significantly from the last traded price or the displayed price at the time of order placement, particularly during periods of high market activity or low liquidity.

Market orders are typically given priority over other types of orders, such as limit orders, in terms of execution. This is because market orders are considered "at market" and require immediate execution based on the best available prices.

Unlike limit orders, market orders do not provide control over the execution price. Investors are price-takers. This lack of price control can be a disadvantage when trading in volatile markets or during price gaps, as the executed price may deviate significantly from the expected price.