Market order definition

What is a market order?

A market order is an instruction from a trader to their broker to execute a trade immediately at the best available price. Market orders are usually implemented very quickly, provided there is enough liquidity in the market. When a market order has been executed, it is referred to as a ‘filled order’.

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When would traders use a market order?

Traders would use a market order when they want to buy or sell at or near the current market price. Traders who prefer simplicity often choose market orders, because there is no stipulation of a particular price or timeframe. Sometimes, market orders also incur lower commission that other types of orders.

How do market orders differ from stop and limit orders?

There are differences between market orders, stop orders and limit orders. With market orders, traders do not have any control over the price at which their order is filled; the market order will be filled at the current market price. It is important to note that this could be different from the indicative prices visible when placing the order due to slippage.

With stop orders (stops), traders can decide to execute a trade if the market reaches a level that is less favourable than the current market price. This can be a useful risk management tool as it can minimise losses on a trade. However, non-guaranteed stops can also be subject to slippage.*

A stop order is the opposite of a limit order. With limit orders (limits), traders can decide to buy or sell an asset at a more favourable price than the current market price. They are often used to lock in profits.

Read more about stops and limits in this guide

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* If the market suddenly gaps beyond your stop level, your position may be closed at a worse level than requested. This is known as slippage. To avoid slippage, you can add a guaranteed stop, an optional add-on which must be manually selected unless your account includes it automatically. A small premium is payable if your guaranteed stop is triggered.

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