Market Order vs Limit Order: When to Use Each
Order types are fundamental to trading execution. Understanding when to use market orders versus limit orders can save you money and improve your fill prices.
What Is Market Order?
A market order executes immediately at the best available price. It guarantees execution but not price. You might pay more (when buying) or receive less (when selling) than the last traded price.
What Is Limit Order?
A limit order executes only at your specified price or better. It guarantees price but not execution. Your order might not fill if the market never reaches your limit price.
Key Differences
| Feature | Market Order | Limit Order |
|---|---|---|
| Execution | Guaranteed | Not guaranteed |
| Price | Not guaranteed | Guaranteed or better |
| Speed | Instant | May wait or not fill |
| Slippage | Possible | None |
| Best for | Liquid stocks, urgency | Specific prices, illiquid stocks |
The Bottom Line
Use market orders for highly liquid stocks when you need to get in or out immediately. Use limit orders when you have a specific price target, are trading illiquid stocks, or want to avoid slippage.