Introduction To Order Types: Market Orders
AAA
  1. Introduction To Order Types: Introduction
  2. Introduction To Order Types: Long And Short Trades
  3. Introduction To Order Types: Market Orders
  4. Introduction To Order Types: Limit Orders
  5. Introduction To Order Types: Stop Orders
  6. Introduction To Order Types: Conditional Orders
  7. Introduction To Order Types: Duration

Introduction To Order Types: Market Orders

Note: Use a market order to guarantee a fill. A market order is the fastest and most reliable way to get in out of a trade. A market order is appropriate if getting filled is more important than getting a certain price.

A market order is the most basic type of trade order. It instructs the broker to buy (or sell) at the best price that is currently available. Order entry interfaces usually have "buy" and "sell" buttons to make these orders quick and easy, as shown in Figure 1. Typically, this type of order will be executed immediately. The primary advantage to using a market order is that the trader is guaranteed to get the trade filled. If a trader absolutely needs to get in or out of a trade, a market order is the most reliable order type. The downside, however, is that market orders do not guarantee price, and they do not allow any precision in order entry and can lead to costly slippage. Using market orders only in markets with good liquidity can help limit losses from slippage.


Figure 1 - A market order is the most basic type of trade order. Order entry interfaces usually have "buy" and "sell" buttons to make these orders quick and easy. Image created with TradeStation.

Ideally, a market order to buy is filled at the ask price, and a market order to sell is filled at the bid price. It is essential to remember, however, that the last-traded price is not automatically the price at which a market order will be executed. This is especially true in fast-moving or thinly traded markets.

For example, a trader may place a market order to go long 1000 shares of ABC stock when the best offer price is currently $20.00 per share. If other orders in the queue are executed before this trader's order, the market order may fill at a higher price. It is possible, also, that parts of the order will execute at different prices. In this example, half of the order might execute at the best offer price and the other could fill at a higher price. A market order does not guarantee price - it only guarantees a fill. Introduction To Order Types: Limit Orders

  1. Introduction To Order Types: Introduction
  2. Introduction To Order Types: Long And Short Trades
  3. Introduction To Order Types: Market Orders
  4. Introduction To Order Types: Limit Orders
  5. Introduction To Order Types: Stop Orders
  6. Introduction To Order Types: Conditional Orders
  7. Introduction To Order Types: Duration
RELATED TERMS
  1. Bidding Up - Securities

    The act of increasing the price an investor is willing to pay ...
  2. Bid Wanted

    An announcement by an investor who holds a security that he or ...
  3. Mass Index

    A form of technical analysis that looks at the range between ...
  4. Money Flow Index - MFI

    A momentum indicator that uses a stock’s price and volume to ...
  5. On-Balance Volume (OBV)

    A momentum indicator that uses volume flow to predict changes ...
  6. Negative Volume Index - NVI

    A technical indicator that relies on changes in a security’s ...
  1. What happens to my annuity after I die?

    Understand the different types of annuity payment plans and what payments or additional benefits are payable to your beneficiaries ...
  2. What is the first day of the quarter?

    Learn when the first day of the quarter is. Explore why investors and analysts prefer to compare results year-over-year due ...
  3. What is the difference between a quarter and a year in finance?

    Examine the difference between a fiscal quarter and a fiscal year. Learn why investors examine both quarterly and annual ...
  4. What are some of the most common technical indicators that back up Doji patterns?

    Learn important technical indicators that reinforce a doji candlestick pattern to take advantage of profitable trading opportunities.

You May Also Like

Related Tutorials
  1. Bonds & Fixed Income

    Investing For Safety and Income Tutorial

  2. Economics

    American Depositary Receipt Basics

  3. Investing Basics

    Stock Basics Tutorial

  4. The NYSE floor excitement after a rebound. Being a stock trader can be highly gratifying.
    Active Trading Fundamentals

    Introduction to Stock Trader Types

  5. Trading Strategies

    Guide to Pairs Trading

Trading Center