Understanding Market Order

Market order

A market order is an order to immediately buy or sell at the best available price. It needs liquidity to be filled, meaning that it is executed based on the limit orders already placed on the order book. If you want to buy or sell instantly at the current market price, setting a market order is your best option.

Market Order

For example, the price of BTC might be rising rapidly, and you want to buy it ASAP. You’re willing to take the market’s price so long as you can purchase BTC instantly. In this case, you’d make a market order on your chosen exchange.

How A Market Order Works

Unlike limit orders which are placed on the order book, market orders are executed instantly at the current market price (CMP). There are always two sides in a trade; the maker and the taker. When you place a market order, you are taking the price set by someone else that is the maker.

Market Order Example

For example, an exchange will match a purchase market order to the lowest ask price on the order book. In contrast, a sell market order will be matched with the highest bid price on the order book.

When To Use A Market Order

As we’ve seen, order type is handy when getting your order filled is more important than getting a specific price. This means you should only use market orders if you are willing to pay a higher cost caused by the slippage. In other words, market orders are helpful if you’re in a rush.

Sometimes you might be in a situation where you had a stop-limit order that was passed over, and you need to buy/sell as soon as possible. So if you need to get into a trade right away or get yourself out of trouble, that’s when market orders come in handy.

However, if you’re not a complete beginner to crypto and want to purchase some altcoins with your Bitcoin, avoid using a market order because you might pay more than necessary. In this case, a limit order is probably better. You can preferably trade with USDT pairs to reduce fees.

Types Of Orders

There are different types of orders available on all trading platforms whether you are a crypto trader or stocks trader or currency pair. The following are the types of orders presented to any trader depending on choice of use to either initiate a buy order or sell order:

  • Market Order.
  • Limit Order.
  • Stop Order.
  • OCO (One Cancel Another).

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What is an example of a market order?

For example, the price of BTC might be rising rapidly, and you want to buy it immediately; you’re willing to take the market’s price so long as you can purchase BTC instantly. In this case, you’d make a market order on your chosen exchange to buy BTC at the current market price.

What is market order vs limit order?

Market orders are filled immediately but limit orders are filled into the order book to be filled at a specified amount and until that amount is filled, the order will still be pending in the order book.

When would you use a market order?

If you want to buy an asset or coin immediately, the best order to use is the market order as it iis filled in the order book immediately at the current market’s price.

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