Placing buy/sell orders on an exchange is making an offer to other traders to trade a certain asset. Different orders can be used depending on desired results, and a market order is pretty simple to execute. This type of order means that a trader is looking to purchase an asset at the best possible price at the time, and will generally be instantaneously filled, depending on the asset’s liquidity.
Market orders don’t add entries to the order book, but insteadutilise existing market prices. This can make it harder to control the outcome, as fluctuations in the price while the order is being filled can lead to fluctuations in what is purchased or sold. It is also susceptible to slippage, with different levels of impact dependent on the volatility of the asset. Put simply, slippage is a deviation of the entered order’s price versus the filled price.
The advantages of entering a market order are that they are simple to execute and generally instantaneous. These may be best suited to traders actively looking to capitalize on market price movements without any limitations over a given timeframe, especially those with low volume assets where slippage would otherwise be high. Market orders also prove useful when an order is missed with a stop-limit or for beginners just hoping to get in and out of a trade as quickly as possible.
However, due to the risk of slippage, market orders can at times be greater in cost than other potential orders. This portion of a Order should not be enjoyed nor overlooked in exchanges and significant caution must be taken while navigating your participation in the market.
