What is the difference between market order from a limit order?

 What is the difference between market order from a limit order?

An order to purchase or sell an asset at the best price currently offered in the market is referred to as a market order. It is carried out right away, regardless of the cost. An order to purchase or sell a security at a specific price or higher is known as a limit order. If the stock cannot be bought or sold at the specified price, the order won't be carried out, and it will only be performed at that price or a better one. In conclusion, a limit order promotes price certainty while a market order prioritises speed of execution.


When a trader wishes to purchase or sell a security as fast as possible, regardless of the price, they utilise a market order. The best market price at the time the order is made is used to instantly execute the transaction.

On the other hand, a limit order is a request to purchase or sell a security at a set price or higher. The order will only be carried out if the security can be purchased or sold at the stated price or a lower price after the trader has set the desired price. The order won't be carried out if the security cannot be bought or sold for the agreed upon price.

Limit orders allow traders more control over the price at which trades are executed, but they also run the risk of preventing trades from being performed altogether if the market price never reaches the limit price. Limit orders are used in markets where price is more essential than speed of execution, whereas market orders are typically utilised in fast-moving markets where a speedy execution is more important than the price of the trade.


Additionally, limit orders can also be used to limit potential losses or lock in profits. For example, if a trader has bought a stock at a high price and the stock's price drops, they can use a limit order to sell the stock at a lower price, thereby limiting their losses. On the other hand, if a stock's price increases, a trader can use a limit order to sell the stock at a higher price, thereby locking in profits.

Limit orders can also be used to lock in profits or reduce possible losses. A limit order can be used, for instance, to sell a stock at a lower price after a trader purchased it at a high price, so reducing their losses. On the other side, a trader can use a limit order to sell a stock at a higher price if the stock's price rises, locking in profits.

The degree of assurance regarding the execution of the order is another distinction between market and limit orders. Market orders are executed instantly and with a high degree of certainty, but at an unknowable cost.

In conclusion, both market and limit orders have advantages and disadvantages, and the decision between them is based on the trader's objectives, the state of the market, and trading preferences. When selecting whether to utilise market or limit orders, traders should take into account their own objectives and level of risk tolerance.