Market orders are instructions given to a trading platform or a broker to sell or purchase a security at the best price instantly. Compared to limit orders, the market order prioritises the swiftness of implementation over pinpointing a specific cost. Market orders are perfect for investors who aim to conduct a trade immediately and are not worried about the exact pricing.
Things to Know About Market Order
When placing the market order, you must instruct the broker to purchase or sell the security at the existing market price. You can do so via an online platform or by reaching out to the broker directly. Market orders get implemented instantly, guaranteeing the trade is concluded as soon as possible. The price is not guaranteed and is decided based on the general market price during the execution time. The main price might vary greatly from the price that was followed when the order was set.
All market orders are liquid, which makes them a safe option for individuals who are trading massive cap commodities or heavily exchanged securities. This particular liquidity guarantees the order gets filled instantly, lowering the chances of delays during execution and price slippage. However, it’s paramount to weigh the bid-ask spread, specifically when you’re trading small-cap stocks.
The stock exchange also matches the purchase order with a different investor’s sell order to perform the transaction. There is a minor risk for both sellers and buyers, as the price at which the order is executed could vary from the price at which it was originally placed.. This primarily occurs because of the volatility.
Conclusion
Market orders are much different than limit orders, and as a trader, when you place such an order, you are asking your broker to buy or sell immediately.