4.11What is a market order?
1What is it?
A market order buys or sells immediately at the best available price.
2Why does it exist?
Use it when getting the trade done matters more than the exact price.
3Stock market example
Suppose (hypothetical prices) a stock’s LTP is ₹420.00 and the best seller is at ₹420.05. A market buy for 10 shares fills at ₹420.05. In an illiquid stock, a market order might fill much higher than you expected.
4Advantages
- ✓Almost guaranteed to fill.
- ✓Simple.
5Risks
- No price control: slippage in fast or illiquid markets.
6Quick revision
- Fills immediately at best price.
- No price control.
- Use for liquid stocks.
7Knowledge check
Q1. Main advantage of a market order?Show answer
Immediate execution.
Q2. Main risk?Show answer
Slippage: a worse price than expected.
Q3. Should you use market orders in illiquid stocks?Show answer
Better to avoid; use limit orders.