When you buy or sell a stock, the first decision you face is how to place the trade. And the most common way retail investors do it is with a market order.
But just because it's popular doesn’t mean it’s always the right move.
Understanding what a market order does, how it works, and where it fits in your strategy can help you trade more deliberately and avoid unexpected outcomes.
#A Market Order Gets You In or Out Fast
A market order tells your broker to buy or sell a stock right now at the best price available. It doesn’t set any conditions on price. It just executes as quickly as possible.
Think of it like telling your broker: “Get it done immediately, I don’t care what price I get.”
Because it prioritizes speed, the market order will almost always be filled. And usually, the fill happens in seconds. This makes it useful when you need to enter or exit a position without delay.
#How It Actually Works
Let’s say you want to buy 100 shares of Apple Inc (NASDAQ: AAPL). You place a market order. Your broker scans the order book and finds the lowest price a seller is willing to take. Maybe that’s $176.42.
Your order fills at $176.42, or close to it, depending on how many shares are available at that price.
If the stock is thinly traded or volatile, your order might fill in pieces at different prices, known as slippage. Instead of one clean trade at $176.42, you could get partial fills at $176.42, $176.45, and $176.50. You still get your full 100 shares, just at slightly different prices.
This is the risk with market orders. You don’t control the price. You only control the timing.
#Why Market Orders Are Common
Retail investors like market orders because they’re simple.
No calculations. No parameters. Just enter the stock, the number of shares, and click buy or sell.
And in most high-volume stocks like Apple, Microsoft, or Tesla, the difference between the bid and the ask is often just a few cents. That tight spread makes it unlikely you’ll get a wildly different price than expected, especially during normal trading hours.
But not every stock trades like Apple.
#When A Market Order Can Go Wrong
The downside of a market order is slippage. And slippage can get expensive if you're trading:
Low-volume stocks
With fewer buyers and sellers, there may be big gaps between prices. Your order might fill at prices you didn’t expect.
After-hours or pre-market
Liquidity dries up. Spreads widen. Volatility spikes. A market order during extended hours can lead to nasty surprises.
Fast-moving markets
If news breaks or the market reacts sharply, prices can change in seconds. Your order might fill far from where the stock was just moments ago.
Example:
You place a market order to buy a small-cap stock trading at $9.95. But by the time your broker executes it, the best price is $10.30. That 35-cent slippage on a 1000-share order just cost you $350.
Now imagine that happening repeatedly over time. It adds up.
#Limit Orders Give You More Control
A limit order lets you set the maximum price you’re willing to pay when buying, or the minimum you’ll accept when selling.
So instead of just saying “buy now,” you can say “buy, but only if I can get it at $25.50 or better.”
You may not get filled right away. Or at all. But you avoid paying more than you're comfortable with.
This tradeoff between control and speed is something every investor has to weigh.
#When A Market Order Makes Sense
There are situations when a market order is a smart choice.
Highly liquid stocks
Blue chips and large ETFs with tight bid-ask spreads are safe ground for market orders. The difference in price is usually minimal.
Urgent trades
If you’re trying to exit a losing position or buy into a breakout, you may care more about execution than precision.
Small position sizes
If you're buying 10 or 20 shares of a high-volume stock, a market order probably won’t hurt you.
But if you're trading with size or dealing with less liquid names, consider a limit order instead.
#Market Orders and Stop Losses
Another time a market order comes into play is when you use a stop-loss.
A stop-loss is a trigger. Once the stock hits a certain price, it converts to a market order and sells your shares at the best price available.
This helps you cut losses quickly. But remember, in volatile markets, a stop-loss market order can still get filled at a much lower price than you expected. That’s the tradeoff for certainty of execution.
If that’s a concern, you could use a stop-limit order instead. That way, you keep some control over how low you’re willing to go.
Learn more about stop-loss orders here: What is a Stop-Loss Order?
#How Market Orders Work With ETFs
ETFs usually trade like stocks. But the underlying assets can affect how they behave.
For example, if an ETF holds illiquid bonds or foreign equities, its market price might not always match its net asset value. Using a market order in these ETFs could result in buying above the value of the underlying assets.
Stick to limit orders if you’re trading less-liquid ETFs or doing it outside of regular hours.
#Key Takeaways
A market order is the fastest way to buy or sell a stock, but speed comes at the cost of control.
Use them when:
You’re trading high-volume names
You need immediate execution
Slippage risk is low
Avoid them when:
Trading illiquid stocks
Markets are volatile
You’re placing large orders
Always weigh the need for speed against the risk of a poor fill. If precision matters more than immediacy, use a limit order instead.
#Ask Yourself Before Using a Market Order
Am I trading during regular hours?
Is this stock highly liquid?
Can I accept a slightly worse price to guarantee execution?
Would a limit order serve me better in this case?
Making these decisions ahead of time will help you protect your capital, reduce execution risk, and trade with more confidence.
The tool is simple. But the strategy around it is what separates a rushed trade from a smart one.