Market Order - What is it and How to Use it?

Updated May 08 2022

Market Order - What is it and How to Use it?

Table of Contents:

Market Order Explained

A Market Order is a type of trading order designed to achieve instant execution upon availability by buying or selling an asset at the best price available at the time of execution.

Market orders never guarantee a particular price, you never know what you could end up getting as everything really depends on availability.

Important note: Market orders get executed instantly, if you click the buy or sell button, there’s no going back.

Market Order

Look at the example above: a trader placed an order to buy 100 shares and the price of the asset was $15.

In that precise moment of time, there are 2 sources of liquidity (availability):

The moment that the trader clicked buy at $15, the following scenarios could happen:

With market orders you never know what could exactly happen.

I know what you’re thinking: this sounds scary!

Yes, it does, but it’s not that bad as it sounds, we just presented all possible scenarios. In reality this depends on 2 different variables: liquidity and volatility.

In an extremely volatile market where prices can swing before we can blink our eyes then yes, we have no clue what price that market order can get us.

In a low liquidity asset then if no one is executing market orders and there are just a few pending orders on the exchange’s book then yes, we also could end up getting a horrible price. Maybe there were only 5 pending orders with a $2 difference in price each and our market order ate them all.

Featured Brokers for Beginners

Broker Top Features
Visit

75.31% of retail CFD accounts lose money.

  • Customisable or removable leverage
  • Broad asset offering (10,000 +)
  • Competitive forex commissions
Visit

71.24% of retail CFD accounts lose money.

  • Well-structured account offering with options for all types of traders
  • Competitive commissions on their Zero Spread and PAMM accounts
  • Copy trading via MT4 / 5 offered through their HF Copy account
Visit

74-89% of retail CFD accounts lose money.

  • Competitive spreads in their ECN Prime account (From 0.1 Pips)
  • Wide variety of platforms (MT4, MT5, TradingView and IBKR)
  • Over 23,000 + shares
Visit

63.2% of retail CFD accounts lose money.

  • Extensive asset offering (more than 10,000+ products)
  • Real stocks are offered along with CFDs
  • Very competitive share trading commissions when compared to similar brokers
Visit

Your capital is at risk.

  • Over 1,500,000+ assets from several exchanges worldwide
  • All assets are real equities (they do not provide CFDs)
  • InvestIdeas section with great analysis on several high potential stocks
  • 3% per year in their savings D-account (Daily interest accrual)

How to Place a Market Order

Market orders are the simplest of all order types, placing them is as easy as opening your trading platform, choosing an asset, selecting the quantity of the asset and clicking either on buy or sell.

An example of placing a Market BUY order:

Buy Market Order

An example of placing a Market SELL order:

Sell Market Order

Remember, market orders are called like that because you get the MARKET price and you can never be sure which price it will be, specially on high risk conditions such as low liquidity and extreme volatility.

Advantages of the Market Order

These are the main advantages of a market order:

Disadvantages of the Market Order

The main disadvantage of a market order is:

That’s why this type of order regardless of it being simple requires understanding of the conditions where it’s being used to ensure you don’t go broke or watch your account disappear.

Remember, be careful with low liquidity and high volatility.

When should you use a Market Order?

Market orders are commonly used when:

Remember, market orders are all about prioritising execution above price.

A good example of this would be:

Same example applies if you know that a stock you own will go down or the company will declare bankruptcy tomorrow and disappear, you don’t care the exact price you get, you just care about getting a price.

Common Market Order Mistakes

Market Order Common Mistakes

These are the most common market order mistakes (the first one is my personal favourite):

Hope this guide was helpful,

Enjoy!

Author

Stefano Treviso

Featured Brokers

1

FP Markets

75.31% of retail CFD accounts lose money.

2

HF Markets (HFM)

71.24% of retail CFD accounts lose money.

3

BlackBull Markets

74-89% of retail CFD accounts lose money.

4

SquaredFinancial

63.2% of retail CFD accounts lose money.

5

Freedom Finance

Your capital is at risk.

Spread the love by sharing our content!

Feel like reading more?

Head and Shoulders Pattern in Forex Trading

Triangle Pattern in Forex Trading

Fibonacci Retracements Strategy for Forex Traders

Forex Vs. Crypto - Which One Is for You?

Forex Vs. Stocks - Which One is For You?

Risk Management in Forex Trading Explained

Forex Market Hours Explained

Flag Pattern in Forex Trading

Top 5 Forex Trading Indicators List

Top 5 Proven Forex Trading Strategies For All Levels

By using TheTradingBible.com's website you agree to the use of cookies.