What is a Market Order

Introduction

There's more complexity to trading than just deciding to buy or sell. When you're buying or selling any financial asset like cryptocurrencies, stocks, or forex, you'll come across various types of orders. From Fill or Kill orders to stop-limits, market orders are one of the simplest and are often used by beginners. Let’s see what market orders are and how they work.

Market order definition

A market order is an order to immediately buy or sell at the best available price. It needs liquidity to be filled, meaning that it is executed based on the limit orders already placed on the order book. If you want to buy or sell instantly at the current market price, setting a market order is your best option. For example, the price of BTC might be rising rapidly, and you want to buy it ASAP. You're willing to take the market's price. In this case, you'd make a market order on your chosen exchange.

Note: The value of single market price order cannot exceed 100,000 USDT.

How a market order works

Unlike limit orders which are placed on the order book, market orders are executed instantly at the current market price. There are always two sides in a trade; the maker and the taker. When you place a market order, you are taking the price set by someone else. For example, an exchange will match a purchase market order to the lowest ask price on the order book. In contrast, a sell market order will be matched with the highest bid price on the order book.

As mentioned, market orders require an exchange to have liquidity on the order book to meet the instant demand. As a market order removes liquidity from the exchange, you'll pay higher fees as a market taker when you place one. 

Example of a market order

Case 1: Assuming that the current BTC market price is 50,000 USDT, if a user wants to buy BTC immediately at the market price, he can select order type “Market” and set the buying amount as, for example, 50,000 USDT. After the order is placed, the order will be filled immediately, and the unfilled part of the order will be canceled. In a fast-moving market, the final buy price of this order may not be 50,000 USDT, but the real-time market price, which may be higher than 50,000 USDT or lower than 50,000 USDT.

Case 2: Assuming that the current BTC market price is 50,000 USDT, if a user wants to sell BTC immediately at market price, he can select order type “Market” and set the selling amount as, for example, 1 BTC. After the order is placed, the order will be filled immediately, and the unfilled part of the order will be canceled.