What a market order does
A market order tells your broker to buy or sell straight away at whatever price is available at that moment. You set the size of the trade and nothing more. The order is matched against orders already waiting in the markets, so it usually completes within moments when trading is running normally.
The main strength of a market order is certainty of execution. Once you place it, the trade goes through, even if the price shifts while it is being filled. The trade-off is that you do not control the exact price you receive.
What a limit order does
A limit order tells your broker to buy or sell only at a price you set, or better. A buy limit usually sits below the current market price, and a sell limit usually sits above it. The order waits until someone is willing to trade at your level.
The strength of a limit order is certainty of price. You will not pay more than your limit when buying, or receive less than it when selling. The downside is that the order may never fill if the market does not reach your level.
A limit order can also fill only in part. This is called a partial fill, and it happens when fewer units are available at your price than you asked for. The broker fills what it can and keeps the rest open until it fills, you change it, or you cancel it. A market order can also be partly filled when few people are willing to trade at that moment.
A set level or a sure fill
The difference that decides the choice is what you give up. A market order gives up control of the price and keeps certainty of execution. A limit order keeps control of the price and gives up certainty of execution.
Slippage is the gap between the price you expected and the price you actually receive. It shows up mostly with market orders, when the price moves between pressing the button and the trade filling. The gap is larger in fast-moving markets and in investments that trade thinly. Either way, slippage can work for you or against you.
A limit order cannot suffer slippage against you, because it fills at your price or better. Its downside is the chance of no trade at all.
When a market order fits
A market order fits when getting into or out of an investment matters more than the exact price. Examples include a trade that must be completed now, or an investment that many people trade every day, where the buy and sell prices sit close together.
It also suits a long-term investor who buys a broad fund in regular amounts. For that investor, a small difference in price on any single day matters less than being invested on schedule.
Check your broker's own explanation of how it fills market orders. Execution models differ between providers, and the same order type can behave differently across them.
When a limit order fits
A limit order fits when the price matters more than completing the trade straight away. It suits an investor who has a clear level in mind and is willing to wait. Protection against paying far more than expected is strongest in thinly traded shares, where a market order can push the price against you.
A limit order also helps when you cannot watch the screen. The order waits for your chosen level, so you are not reacting to a sudden move.
Expect that a limit order may never fill. If the market moves away from your level, the order can stay open or lapse, depending on its expiry setting. Check the expiry options, such as day or good until cancelled, before you place it, because the names and rules vary by provider.
Which to pick by reader type
Choose by your goal, not by habit. Each type below leans toward a different order.
- A long-term investor buying a broad fund on a regular schedule will often find a market order simpler, since small price differences matter less over time.
- An investor with a target price and time to wait will generally prefer a limit order, since it keeps control of the price.
- A person buying thinly traded shares or entering a fast-moving market should weigh a limit order for protection against slippage.
- A newcomer should read the order guide from their broker and practise on a demo account before using real money.
For a wider view of comparing providers for shares, read how to choose a stock broker, then look at the stock brokers worth comparing.