Introduction To Order Types: Market 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

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. Limit Order

    An order placed with a brokerage to buy or sell a set number ...
  2. Bracketed Buy Order

    A buy order that is accompanied by a sell limit order above the ...
  3. Box-Top Order

    A buy or sell order made at the best market price. If the order ...
  4. Order

    An investor's instructions to a broker or brokerage firm to purchase ...
  5. Day Order

    An order to buy or sell a security that automatically expires ...
  6. Bracketed Sell Order

    A sell order on a short sale that is accompanied (or "bracketed") ...
RELATED FAQS
  1. What are the advantages of a limit order over a market order?

    Understand the functional differences between a limit order and a market order and the respective advantages and disadvantages ... Read Answer >>
  2. What's the difference between a market order and a limit order?

    Buy and sell trades with market orders at the present stock price and execute limit orders if the stock price falls within ... Read Answer >>
  3. How can I use a buy limit order to buy a stock?

    Learn how a buy limit order is used by an investor who wants to buy a stock at a certain price, and understand how limit ... Read Answer >>
  4. What is the difference between a stop and a market order?

    Learn about market orders and stop orders, how they are used and executed, and the main difference between stop orders and ... Read Answer >>
  5. How do I place a limit order online?

    Learn how a limit order is placed, the types of stocks it is most useful for and the specifications placed with it to suit ... Read Answer >>
  6. Why is the execution of a limit order not guaranteed?

    Using a limit order to buy a stock can be helpful in securing certain prices, but the mechanics of a limit order can decrease ... Read Answer >>

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