Lesson 2: Order Types - Market Order

 Market orders

Now that we have covered limit orders, let's focus on another type of order: market orders.

Market orders are instructions to buy or sell an asset immediately at the current market price. Unlike limit orders, where traders set a specific price for the trade, market orders are executed right away at the best price available on the market at that moment.

Key characteristics of market orders:

• Execution speed: Market orders are always executed immediately, which makes them the ideal choice in situations where speed matters more than price.

• Guaranteed execution: Market orders guarantee that the trade will happen, but at a price that may be less favorable, especially in conditions of low liquidity or high volatility.

• Market impact: Market orders can move the market, because they "absorb" the current limit orders to buy (bid) or sell (ask), which can lead to a price change.

 

Example of using market orders:

Imagine that you want to buy or sell bitcoin immediately. When using a market order, a buy will be executed at the best available price (ask), and a sell at the best price (bid). A market order always executes into the existing limit buy or sell orders. How much the price changes depends on the size of the market order and the volume of the nearest limit orders — a large market order can "eat" several levels of limit orders, which leads to a significant price change.

Key differences between limit and market orders:

• Price control: With limit orders, the trader controls the price at which the trade will be executed, while a market order is executed at the current market price, with no way to control it.

• Execution speed: Market orders are executed immediately, while limit orders can stay open until the market reaches the set price.

Market impact: Market orders drive price movement, as they consume the current supply (ask) or demand (bid), while limit orders can hold back market movement.

Let's check how well you've learned the material from this lesson. Answer the questions to test your knowledge and move on to the next lesson.

Congratulations on successfully completing the lesson on market orders! In this lesson we learned to recognize market orders, which are executed immediately at the current market price and influence price movements