Market Orders vs. Limit Orders Explained
A market order prioritises speed; a limit order prioritises price. Knowing when to use each is a basic but vital trading skill.
Key takeaways
- A market order tells the exchange to buy or sell immediately at the best available price.
- A limit order sets the worst price you will accept — a maximum when buying, a minimum when selling.
- Use a market order when execution certainty is the priority and the asset is liquid.
When you place a trade, you choose how it should be filled. The two most common instructions are the market order and the limit order, and they make a very different trade-off between speed and price.
Market orders
A market order tells the exchange to buy or sell immediately at the best available price. It almost always fills, which makes it useful when getting in or out quickly matters more than a few cents. The risk is slippage: in fast or thin markets, the price you get can differ from the one you saw.
Limit orders
A limit order sets the worst price you will accept — a maximum when buying, a minimum when selling. It only fills at your price or better, which protects you from slippage. The trade-off is that it may not fill at all if the market never reaches your level.
Choosing between them
Use a market order when execution certainty is the priority and the asset is liquid. Use a limit order when you care about price, are trading a less liquid asset, or want to set entries and exits in advance. Many traders use both, depending on the situation.
A journalist with several years of experience in news and entertainment reporting, now writing a variety of articles on crypto, finance and markets. Based in New York.
