Market vs limit order

This page explains the key differences between the two most popular ways you can execute a trade: market orders and limit orders. Read on to discover which method is best for you and what you need to consider.
By:
Updated: Sep 20, 2022
Listen

Trade global markets with our top-rated broker, Interactive Brokers.

8/10
Interactive Brokers (U.K.) Limited is authorised and regulated by the Financial Conduct Authority. FCA Register Entry Number 208159. Products are only covered by the UK FSCS in limited circumstances.
Visit site

This page explains everything you need to know using market orders and limit orders via an online trading platform. Read on this learning page to discover how they differ and the pros and cons of each based on your own goals as an investor.

Compare the best trading platforms

Copy link to section

Online trading platforms will execute both market and limit orders for you, and signing up to one with high-quality customer service and low fees is easy. Simply click on one of the links below to get started, or scroll down to keep learning about the market and limit orders.

Sort by:

1
Min. Deposit
$ 10
Best offer
User Score
10
Up to $240 bonus!
Deposit with ACA, Wire, Pay with my bank
Invest for dividends and get payout on stocks on Ex-Dividend day
Start Trading
Payment Methods:
Bank Transfer, Credit Card, Debit Card, PayPal, Wire Transfer
Full Regulations:
CySEC, FCA

Cryptocurrency is offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. Invezz.com is not an affiliate and may be compensated if you access certain products or services offered by the MSB.

2
Min. Deposit
$ 100
Best offer
User Score
9.9
Trade +2000 CFDs on Shares, Options, Commodities & more
Unlimited risk-free Demo Account
0 commissions & attractive spreads with up to 1:5 leverage
Start Trading
Payment Methods:
American Express, Apple Pay, Bank Transfer, Credit Card, Debit Card, Discover, Google Pay, Mastercard, PayPal, SEPA, Trustly, Visa, , skrill
Full Regulations:
ASIC, FCA, FSA, MAS, cysec-250-14-regulator, isa-regulator

82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

3
Min. Deposit
$ 0
Best offer
User Score
9.7
Diverse stock selection providing investors with a diverse array of options for their portfolios.
Advanced trading tools aiding in executing trades with precision in the dynamic stock market.
Easy portfolio management.
Start Trading
Payment Methods:
ACH, Bank Wire, Check
Full Regulations:
CFTC, FCA, FINRA, IIROC, NFA, NYSE, SIPC
Interactive Brokers (U.K.) Limited is authorised and regulated by the Financial Conduct Authority. FCA Register Entry Number 208159. Products are only covered by the UK FSCS in limited circumstances.

What is an order?

Copy link to section

An order is the set of instructions that a trader or investor gives to a broker or other trading platform when trying to buy or sell an asset. This will include the quantity, price and desired time period for execution.

Two of the most popular kinds of orders are market and limit. Below, we have defined each of them.

What is a market order?

Copy link to section

A market order is an instruction from an individual to their broker to execute a trade immediately at the current best possible price. Those who opt for market orders want to acquire an asset immediately regardless of price, and their primary focus is on the speed of this purchase.

Provided there is enough liquidity in the market, these orders are usually executed quickly. Once the order has been implemented, it becomes a ‘filled order,’ and the transaction is finalised.

For example, imagine an investor wants to purchase 5 shares in a given company for $5 within 24 hours. All they need to do is place a limit order for 5 shares along with their chosen $5 price and the amount of time they are willing to wait for it to be executed (1 day). If at any time the stock price reaches $1 or cheaper, the transaction will be confirmed, and the investor will own 5 shares in the company at their desired price or better.

What is a limit order?

Copy link to section

A limit order is more focussed on price than speed, and it is intended to execute a trade at a level that is more favourable than the current market price. Limited orders fall into two categories: entry orders – which open a new position – and closing orders – which close an existing position.

Limit orders allow you to set the maximum price at which you will buy an asset and the minimum price at which you will sell one. As people buy and sell the asset throughout the day, the market price will fluctuate, and if it ever crosses your limit, the trade will be executed as soon as possible.

You can also use something called a stop order, which is a form of limit order that buys or sells an asset at a less favourable price than the current going rate. Stop-loss orders are designed to protect you in the event of an unexpected market crash or decline, as a falling price may activate your stop-loss limit, selling the asset automatically and protecting you from further losses.

The difference between market orders and limit orders

Copy link to section

The key difference is the focus of these two methods. Those who use market orders want to purchase an asset immediately, regardless of the cost. By contrast, for those who use limit orders, speed is not their number one priority. Instead, the focus is on the investor’s target entry or exit price, and the limit order allows them to have clear control of this.

Speed

Copy link to section

Market orders are the fastest way to purchase an asset like a stock, cryptocurrency or commodity. By contrast, with limit orders, there is no guarantee the order will be fulfilled quickly, or at all.

Effectiveness

Copy link to section

With market orders, provided there are willing buyers or sellers, it is likely your order will be fulfilled. This makes them especially effective during trading hours or in highly liquid markets. However, the price you end up paying might be more than you expect, and the price you receive when you sell might be less than you desire.

In the case of limit orders, you are able to buy or sell at an exact price or better, making them more precise and controllable. They can help you enter and exit a position based on a target price you have produced via due diligence. Moreover, stop orders – a subtype of limit orders – allow you to ensure your capital is protected from adverse market activity, such as a crash. However, there is no guarantee that a limit order will be fulfilled quickly, or at all.

In addition, with stop orders, while they may trigger at a certain price, they will only be able to execute at the next available market price.

Start trading now

A quick recap of what we’ve learned

Copy link to section

To summarise, market orders are best for immediate execution, whereas limit orders are more controllable, even if they take longer and may never be executed.

Where can I learn more?

Copy link to section

To learn more about market and limit orders, make sure you check out our in-depth hubs for stocks, cryptocurrencies and commodities. Alternatively, you can try out any of our courses below.


Risk disclaimer
Charlie Hancox
Financial Writer
Charlie is a Financial Writer for Invezz. He covers commodities, cryptocurrencies, and breaking news. Prior to joining Invezz he helped grow Crux Investor into the fastest-growing... read more.