What is Market Order: When To Use & How To Place

Most investors choose market orders as their go-to option in stock trading.

These orders execute almost instantly at the best price available, especially when you have large-cap stocks. However, they might not be the ideal choice for every trade. Your results with market orders depend on what you’re trading. They excel with highly liquid stocks but might give you unexpected prices with thinly traded investments.

The timing of market orders versus limit orders can make the most important difference in your trading results. This piece will show you everything about market orders. You’ll learn their simple mechanics and how to use them effectively, whether you’re just starting or want to improve your strategy.

Let’s discover how you can make smart choices about market orders in your trading approach.

What Is a Market Order and How Does It Work?

Market orders offer the most straightforward way to trade in financial markets. This simple transaction puts speed first, unlike other order types that focus on specific prices.

Definition and simple concept

A market order tells your broker or trading platform to buy or sell a security right away at the best available market price. You request to complete a transaction for stocks, bonds, or other financial assets at the current market price when you place this order. Most online broker transaction pages use this type of order as their default choice. The execution is guaranteed under normal market conditions, though you won’t get a specific price guarantee.

How market orders are executed

Your broker starts looking for a counter-limit order as soon as you place a market order. The exchange matches buy orders with the lowest ask price in the order book, while sell orders pair with the highest bid price. The last traded price doesn’t always determine your market order’s execution price. Market orders execute close to the current bid price for sells and the ask price for buys. Trading happens only during standard hours (9:30 a.m. to 4:00 p.m. ET), and you can’t use market orders in extended-hours sessions.

Key characteristics of market orders

Market orders stand apart from other order types with these distinctive features:

• Speed-focused: Quick execution matters more than price certainty
• High execution probability: These orders almost always fill when there’s enough liquidity
• Price uncertainty: The final price depends on common market conditions
• Day order status: They work only during the standard trading session you place them in
• Liquidity dependent: The asset’s trading volume affects performance

Market orders match with existing limit orders in the current depth of market and use up market liquidity. While they’re easy to execute, these orders might lead to unexpected prices, especially in volatile or thinly traded markets.

Advantages and Disadvantages of Market Orders

Market orders have big advantages and notable drawbacks that traders should know before they make trades.

Advantages:

• Speed: Orders execute almost instantly.
• Simplicity: Easy to place, making them popular among beginners.
• High Fill Probability: Almost always executed if sufficient liquidity exists.

Disadvantages:

• Price Uncertainty: The final execution price may differ from the quoted price.
• Slippage Risk: Particularly in volatile or low-volume stocks.
• Bid-Ask Spread Impact: You inherently incur the cost of the spread.

Market Order vs Limit Order: Understanding the Differences

Market orders happen right away, but limit orders give traders better price control without guaranteed execution. This difference affects how you should use each type of order.

How limit orders function

Limit orders tell your broker to make trades only at a specific price or better. You set the highest price you’ll pay when buying and the lowest price you’ll take when selling. Your order stays active until someone fills it, you cancel it, or it expires. Most brokers let these orders stay active up to three months.

Your limit order might never execute if the stock doesn’t reach your price. Even at your target price, you might not find enough buyers or sellers to complete your order.

Price control comparison

These order types differ in what they prioritize. Market orders focus on making sure the trade happens, while limit orders care more about getting the right price.

Market orders take whatever price is available at the time. Limit orders let you pick your price, and you might even get a better deal than you asked for.

Here’s a simple example: A buy limit order at $144 only goes through if the stock drops to that price or lower. A sell limit order at $164 only executes if the price hits that number or goes higher.

When each order type makes sense

Market orders work best when:

• You need to trade right away no matter what
• You trade popular stocks with small price gaps
• You’re buying or selling fewer than 100 shares

Limit orders make more sense when:

• You want to lock in a specific price
• You trade stocks that don’t move much or are very volatile
• Price differences matter because you’re trading lots of shares
• You don’t want your trade to affect the stock price

Your choice really comes down to what matters more to you: quick execution (market order) or getting your target price (limit order). Market orders are enough for most casual investors who trade popular stocks, but active traders and those dealing with less common stocks prefer limit orders to protect their price.

Still confused between order types? Learn more in our full breakdown of stock market strategies for smarter trading.

When to Use Market Orders

Your choice between when to use a market order and other order types can affect your trading results by a lot. Market orders excel in situations where you need speed more than exact pricing.

Market orders work best with high-volume stocks that have strong liquidity. Most prominent companies like Apple, Amazon, and Tesla trade millions of shares daily. This makes them perfect for market orders. These highly liquid securities usually execute close to the price you see on your screen.

Speed requirements often drive order selection. You might need to sell a position fast or buy shares because of breaking news. A market order will give you instant execution. This quick action helps when you believe the stock price is right and want to get in right away.

We used market orders mainly for smaller trades. To cite an instance, an order for 100 shares at $100 each that executes 10 cents above quote price adds just $10 to a $10,000 trade. This small difference is worth the speed advantage. But with large orders of thousands of shares, price differences become a big deal.

Traders should place market orders only during regular trading hours (9:30 a.m. to 4:00 p.m. ET). Orders placed outside these hours execute at the next market open. This can lead to very different prices due to overnight news or events.

Market orders don’t work well when:

• Trading stocks with low volume and wide bid-ask spreads
• Price control matters more than speed
• Market swings might cause big price differences
• Trading after regular market hours

Sometimes even liquid stocks face unusual price swings. The price you see while placing a market order could be different from what you end up paying. The decision to use market orders depends on whether you need immediate execution more than exact pricing.

How to Place a Market Order: Step-by-Step Guide

You can place a market order in just a few steps after choosing your trading platform. The process is simple and changes slightly based on your choice of desktop interface or mobile app.

Selecting the right trading platform

Your first step is to pick a broker that meets your trading needs. The best platforms provide:

• Low or zero commissions on market orders
• User-friendly interfaces
• Strong mobile capabilities
• Reliable customer support
• Quality research tools

Looking for the best platforms? Here’s a list of the best online trading platforms to get started.

Placing a market order online

Most platforms use this sequence for market orders:

1. Log into your trading account
2. Select the security you wish to trade
3. Click “Buy” or “Sell” to open the order ticket
4. Enter the quantity (shares) or dollar amount
5. Select “Market” from the order type options
6. Review estimated costs including potential spreads
7. Submit your order

Market orders execute only during regular trading hours (9:30 a.m. to 4:00 p.m. ET). Any orders placed outside these hours will execute at the next market open.

Mobile app market order instructions

The mobile trading process follows these steps:

1. Open your broker’s mobile app
2. Select the security from your watchlist or search
3. Tap the “Trade” or “Buy/Sell” button
4. Choose “Market” order type
5. Enter quantity or investment amount
6. Confirm and submit

Most apps let you set stop-loss orders along with your market order to manage risk.

Common mistakes to avoid

These errors can trip up even seasoned traders:

• Trading during high volatility without price protection
• Not checking the bid-ask spread beforehand
• Placing large market orders that could move prices
• Trading thinly-traded securities using market orders
• Making emotional decisions after seeing price movements
• Moving stop-loss orders after placing them
• Trading around earnings announcements

The key is to stay disciplined and follow your original plan instead of making impulsive changes.

Conclusion

Use them wisely:
✅ During regular trading hours
✅ With highly liquid securities
✅ For small, time-sensitive trades

If you’re new to trading, consider starting with how to invest in stocks to build a solid foundation.

FAQs

1. What exactly is a market order?

A market order is an instruction to buy or sell a security immediately at the best available current price. It prioritizes quick execution over a specific price, making it the simplest way to trade stocks.

2. When is the best time to use a market order?

Market orders are most effective when trading highly liquid stocks during standard market hours (9:30 a.m. to 4:00 p.m. ET), when you need immediate execution, or when dealing with small transactions where slight price variations are less impactful.

3. What are the main risks associated with market orders?

The primary risks of market orders include price uncertainty, potential slippage (difference between expected and actual execution price), and the immediate surrender of the bid-ask spread. These risks can be more pronounced in volatile markets or with thinly traded securities.

4. How does a market order differ from a limit order?

While market orders prioritize immediate execution at the current market price, limit orders allow you to set a specific price at which you’re willing to buy or sell. Market orders guarantee execution but not price, whereas limit orders guarantee price but not execution.

5. What steps should I follow to place a market order?

To place a market order, log into your trading platform, select the security you wish to trade, choose “Market” as the order type, enter the quantity or dollar amount, review the estimated costs, and submit your order. Remember to only place market orders during standard trading hours for best results.