Market Order
The simple one
A market order instructs the broker to execute a trade as quickly as possible at the current market price. The focus is on immediate execution, not on achieving a specific price.
Learn more about this order type.
What is a Market Order?
This order type is used to buy or sell a financial instrument at the best price currently available on the exchange. It prioritises speed of execution over price certainty. Market orders are typically filled quickly during regular trading hours, but the final execution price may differ from the last quoted price, particularly in fast-moving or less liquid markets.
Disclaimer
By selecting this order type, you prioritize execution speed over execution price. Using a market order is generally acceptable when trading highly liquid securities during regular trading hours with low capital. However, it can be risky to use a market order for trading more exotic securities because of larger spreads (the difference or gap that exists between two prices).
Key Features
Immediate Execution
- A market order is designed to be executed as quickly as possible at the current market price.
- For this type of order, the focus primarily lays on the speed of execution.
Price Acceptance
- When placing a market order, you agree to accept the best available price in the market at the time of execution.
- The actual execution price may be different from the last traded price due to market fluctuations, especially in volatile markets.
How does it work?
After you place a market order, an executing broker forwards it to the relevant exchange or market where the security is traded.
Buy Order
If it’s a buy order, the order will be matched with the lowest ask price.
Sell Order
If it’s a sell order, the order will be matched with the highest bid price.
Example:
You would like to submit an order to buy 300 shares of XYZ.
The shares are currently being traded at a price of 20 EUR per share. When you place a market order to buy 300 XYZ shares, the broker will forward the order for execution at the lowest available ask price.
A seller offers 300 shares for 20.50 EUR per share. This is the lowest price currently available, so your order is executed at 20.50 EUR per share. If there isn’t enough liquidity at that price, a market order may be filled at higher prices until the entire order is executed.
Let’s say a seller offers not 300, but only 100 shares at 20.50 EUR. The next available ask price is 200 shares at 22.00 EUR.
This means that the order is partially filled: 100 shares are bought at 20.50 EUR and the remaining 200 shares at 22.00 EUR each.
Market orders are executed against the best available prices in the order book until the requested quantity is filled.
The order is executed at the best available price(s) in the order book until the entire order is filled. If there is not enough liquidity at the best price, the order will continue to be filled at the next best prices until the entire amount is executed.
Advantages and disadvantages
Advantages
Disadvantages
- Immediate Execution:
Market orders are generally executed quickly during regular trading hours. This can be useful when speed of execution is more important than price control.
- Lack of Price Control:
The execution price is not guaranteed. In volatile markets, purchases may occur at higher prices or sales at lower prices than expected.
- Simplicity:
Only the quantity and instrument need to be specified, which makes market orders straightforward to place.
- Potential for Slippage:
Slippage refers to the difference between the expected price and the actual execution price. It is more likely to occur in fast-moving or less liquid markets.
- Liquidity Utilization:
In highly liquid markets, the execution price is often close to the displayed price, resulting in reliable fills. If price control is important, a limit order may be considered instead.
- Partial Fills:
If there is insufficient liquidity at the best available price, the order may be executed in parts at less favourable prices until the full amount is filled.
Submitting a Market Order via LYNX
In LYNX+, you can search for financial instruments using the search bar in the top right corner. You can search by name, ISIN code, or ticker symbol.
After selecting an instrument, you will be taken to the product overview. In the top right corner, you can click on Buy or Sell to open the order ticket.
Specify the quantity and set the validity of your order under Time in Force. Select MKT from the Order Type dropdown menu.
After reviewing the order details in the summary, click Send Order to submit or Cancel to discard the order.
After logging in to TWS, open the order ticket by clicking Order in the top left.
If a financial instrument is already selected, its order ticket will open automatically. You can change the instrument by typing its name, ticker, or ISIN in the Financial Instrument column at the top of the order ticket.
Then choose the action (buy or sell), specify the quantity, the destination, and set Time in Force for your order. Select MKT from the Order Type dropdown menu.
In the bottom left of the order ticket window, click Preview to review the order details. Then click Transmit to submit or Close to exit without submitting.
Tap the Search icon in the top right and enter the name, ISIN, or ticker symbol. Select a result to open the instrument’s page.
By clicking Buy or Sell, you will access the order ticket. Specify the quantity and set the validity under Time in Force. Select MKT as the order type.
Before submitting, you can check the order parameters using the Preview/Calculator icon at the bottom right.
To submit, swipe right over the Slide To Submit Buy/Sell button.
Tips before submitting a Market Order
When placing a market order, it is important to consider several factors that may influence execution quality and final pricing.
Liquidity
Check whether the financial instrument you are trading has sufficient liquidity.
Higher liquidity is typically associated with tighter bid-ask spreads and less impact on the price when executing a market order.
For larger orders, execution may occur in multiple parts and at different prices.
Timing
Market orders are usually executed more efficiently during regular trading hours, when liquidity is highest.
Outside regular trading hours, execution may take place at less favourable prices.
Be aware that major economic announcements or earnings releases can lead to rapid price changes, which may affect the final execution price.
Also avoid placing market orders during major economic announcements or earnings reports, as these events can cause rapid price fluctuations.
Monitoring
The bid-ask spread is the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept.
A wider spread can increase execution costs, as the difference between bid and ask prices directly affects the fill price of a market order.
FAQ
Will my market order be executed if the market is closed?
No, market orders are executed only during the trading hours of the relevant exchange or trading venue. If you place a market order outside these hours, it will normally be queued and forwarded for execution once the market opens.
What is the difference between the market order and limit order?
Market orders and limit orders differ in their priorities. A limit order focuses on price, allowing the trader to set the maximum purchase price or minimum selling price. A market order focuses on execution speed and is forwarded for execution at the best available price in the order book.
Limit orders are executed only at the specified price or better, while market orders are typically executed quickly during regular trading hours, but the exact execution price cannot be guaranteed.
When can a market order be considered?
A market order is typically used in situations where the priority is execution speed rather than price control. This is often the case in highly liquid markets during regular trading hours, where such orders are usually filled quickly at the best available price. In volatile or less liquid markets, however, the final execution price may differ from the last quoted price.
What should be considered before placing a market order?
Before submitting a market order, it is important to take into account factors such as overall market conditions, potential price volatility, and the available liquidity of the instrument. These elements influence how quickly the order can be executed and at which prices it may be filled.
Can a market order be cancelled after it has been placed?
Once a market order has been submitted, it is usually executed very quickly during regular trading hours. As a result, cancellation is in most cases no longer possible.
Explore other order types
Limit Order
Order Types
A limit order is an instruction to buy or sell a financial instrument at a specified price or better. It provides price control, but execution is only possible if the market reaches the set limit price.
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Stop Order
Order Types
A stop order is activated once a specified stop price is reached. It then becomes a market order to buy or sell the financial instrument.
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Stop Limit Order
Order Types
A stop-limit order is triggered once a specified stop price is reached. After activation, it becomes a limit order at the user-defined limit price.
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Trail Order
Order Types
A trailing stop order automatically adjusts the stop price by a fixed amount or percentage as the market price moves, helping to follow upward or downward trends.
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Trail Limit Order
Order Types
A trailing stop-limit order adjusts the stop price by a fixed amount or percentage as the market moves. Once the stop price is reached, a limit order is placed at the predefined limit level.
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Market if Touched Order
Order Types
A Market-if-Touched order is activated when the market reaches a predefined trigger price. Once triggered, it becomes a market order and is executed at the best available price.
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Limit if Touched Order
Order Types
A Limit-if-Touched order is activated when the market reaches a predefined trigger price. Once triggered, it becomes a limit order at the user-specified price.
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Bracket Order
Order Types
A Bracket Order combines three orders: an initial buy or sell order, a take-profit order, and a stop-loss order. Once the initial order is executed, the system automatically places the two opposite orders to manage risk and potential profit.
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