Online Share Trading

What is the Difference Between Market Order and Limit Order

An Overview

An order to purchase or sell stock can be placed on the stock market. Technically, a buy or sell order can be described as a purchase or sale transaction. Investors have two options when it comes to stock exchange transactions: limit orders or market orders. A limit order and a market order are two options for buying or selling shares in the stock exchange.

Definition - Market Order vs Limit Order

Here's how to distinguish between a market or limit order.
A market order, in stock market terms, is a purchase order or sell order. Investors simply specify the quantity they want to sell or buy, and the market price is determined using current market prices.
Limit orders are where investors specify quantity and price. The order will only be executed when the market price has reached the desired level.

What is a Market Order? How does it work?

Market orders specify the quantity of goods that will be purchased and sold, rather than the price. Market orders are used to place transactions at the current market price. Investors often keep an eye on stock prices for several weeks or months to ensure that it reaches the desired level.
Once an order is placed, the exchange receives X shares. The transaction is complete when the stock exchange matches the buy and sell orders of other investors.

There are some things you need to know before you place a market or order

Market orders can pose a small risk to both sellers and buyers. There could be up to a second delay between the moment an order is placed, and when it is executed. Stock market prices change every millisecond so the actual execution price may be different from the one that was placed.
Although the price for 100 shares may be Rs 200 at the time, it may not be executed until the share price has fallen to Rs 198 by the time the order is placed.

What is a Limit Order? How does it work?

Limit orders require you to specify the amount you wish to purchase and sell, as well as the price that you are willing to pay. The order will not be fulfilled if the price is different. This is the key difference between a market or limit order.

What should you know about limit orders before placing one?

The broker can cancel limit orders if they do not reach the desired amount in one trading session. Limit orders can't be guaranteed to work 100% of the time. Orders for different quantities at Rs 2000 from more than one investor will be fulfilled based on the order that arrived at the exchanges first. The orders will be fulfilled in ascending order.
An investor cannot purchase shares if there are no selling or buying orders. Limit orders that are placed at the same price will be executed until there is enough stock.

Which should you use: A market order vs. a limit order?

A market order is better if the goal is to quickly buy or sell shares. This is because buying and selling are governed by market conditions, not a price. Market orders are best for people who invest long-term and don't worry about market fluctuations.
Limit orders work better for investors who want to profit from an uncertain market. They are also better suited for traders looking to make short-term profits. Experienced investors often use limit orders. They require more knowledge and experience. It doesn't matter what path you choose, it is important to understand the stock market's inherent risks.

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