Market order
Family II · Orders
Not to be confused with stop market order, top of market order, stock market order types.
Market order is an instruction to buy or sell a financial instrument immediately at the best available current price. It does not specify a price limit, so execution is prioritised over price certainty. The price actually obtained is whatever the market offers at the moment the order reaches the venue.
How a market order executes
A market order is sent to a trading venue, such as an exchange or a broker's internal matching system, where it is filled against the best available opposite-side orders. The order may be partially filled at several prices if the size exceeds the quantity available at the best quote. The resulting average price is the volume-weighted average of those fills.
Because no price is specified, the order can execute at a price different from the last traded price or the quote visible when the order was entered. This difference is known as slippage.
Worked example
An investor buys 1,000 shares of a stock using a market order. The order book shows the following sell orders:
The order fills at three different prices, producing an average price of 10.0195. The best ask was 10.00, so the slippage is 0.0195 per share.
When market orders are used
Market orders are used when the priority is immediate execution rather than a specific price. They are common in highly liquid instruments where the bid-ask spread is narrow and the order size is small relative to available liquidity. In less liquid instruments or during volatile periods, the price impact and slippage can be substantial.
Some brokers and venues offer order types that combine immediate execution with a price limit, such as a marketable limit order, which can protect against extreme price movements.
Often confused with
- stop market order
- A stop market order is an instruction to buy or sell a security at the prevailing market price once a specified stop price is reached, at which point it becomes a market order.
- top of market order
- A top of market order is an instruction to trade immediately at the best available price, taking whatever quantity is currently offered or bid rather than resting in the order book.
- stock market order types
- Stock market order types are the standard instructions a trader gives a broker specifying how and when a buy or sell of shares is to be executed, including market, limit, stop and stop-limit orders.