Market Order
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A market order is an instruction to execute a trade at the best available price in the market under the current conditions. The primary objective is immediate execution rather than a guaranteed execution price.
What We Control and What We Do Not
With a market order, we generally control the direction and size of the trade, but we do not specify the exact execution price. In a fast-moving or illiquid market, the execution price can differ from the price we saw when submitting the order.
Why This Matters
Market orders can be useful when execution certainty is more important than price precision. However, slippage and the bid-ask spread can affect the actual result.
Example
If the displayed ask is 100.00 but the available liquidity at that price is insufficient, a market buy order may execute across several price levels.
Key Terms
Market order, execution, liquidity, spread, slippage.
Knowledge Check
- What is the main objective of a market order?
- Does a market order guarantee the exact displayed price?
- Why can liquidity affect the execution price?