A market order is an instruction to buy or sell a security immediately at the best available current price. These orders prioritize execution speed over price. When you place a market order, you accept the prevailing market rate, which may fluctuate slightly between the time you click buy and the time the trade executes. This is known as slippage.
A limit order is an instruction to buy or sell a security only at a specific price or better. A buy limit order executes only at the limit price or lower, while a sell limit order executes only at the limit price or higher. These orders prioritize price control over execution speed. If the market price never reaches your specified limit, the order will not execute.
Market orders are useful when you need to enter or exit a position instantly. Limit orders are preferred by traders who want to avoid paying more than a set amount or receiving less than a desired return. Both order types carry inherent risks, as market conditions can change rapidly. Trading involves significant risk, and you should understand the mechanics of order execution before committing capital to the financial markets.
How this answer was produced
AI-assisted draft, human-reviewed by AlphaScala editorial against our standards before publication. General education, not advice for your specific situation.