A Market Order is a type of order to buy or sell a security at the best available price in the current market. It's designed to ensure quick execution but not a specific price, making it suitable for liquid markets where price slippage is minimal.
"If you place a market order to buy 100 shares of a stock, the order will be filled by matching it with the lowest price sellers until all 100 shares are bought."
Market Orders are subject to price slippage, especially in volatile or illiquid markets. This means the execution price may be different from the expected price when the order was placed, particularly for large orders.
"If you place a market order to buy a large amount of a thinly traded cryptocurrency, you may end up paying a higher price than expected due to lack of sufficient sell orders at the lower price levels."
Market Orders are often used when the priority is to execute the order quickly rather than to get a certain price. They are commonly used in strategies that require immediate execution, such as high-frequency trading or arbitrage.
"In a fast-moving market where prices are rapidly rising, a trader might use a market order to quickly buy a security before the price increases further."
Market Orders differ from Limit Orders, which specify a price limit at which the order must be executed. While Market Orders prioritize speed over price, Limit Orders prioritize price over speed.
"If you want to buy a stock but only at a specific price or better, you would place a limit order, not a market order."
* All terms and definitions may update as the Cryptionary improves.
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