Financial Word of the Day: Market Order

Larry Jones
Aug 18
2 min read

Updated: Aug 19

Definition of Market Order

A market order is an instruction to buy or sell a security immediately at the best price currently available. It prioritizes speed of execution over the exact price you’ll pay or receive.

Why It Matters

When you just want in (or out) now, a market order is the “no-frills” button. There’s no haggling—your broker grabs the best price in the market and fills the order as fast as possible. For highly liquid stocks and ETFs (think big names with lots of daily trading), that usually means you get a price very close to the last quoted price.

A Simple Example

You’ve decided to buy 100 shares of a large, well-known ETF during normal market hours. You submit a buy market order. Within seconds, your order fills—maybe at $100.03, $100.05, or a blend if your 100 shares fill across a few sellers. You didn’t pick a price; you picked speed.

Pros:

Fast execution: You’re in or out almost instantly during market hours.
High fill likelihood: Especially with liquid securities, partial fills are rare and you’ll typically get your full amount.
Simplicity: No need to set specific prices, limits, or conditions.

Cons:

Price uncertainty (slippage): The final price might differ from the last quote, especially in fast-moving or thinly traded markets.
Wider spreads risk: Pre-market, after-hours, or low-volume names can have big bid/ask gaps—your fill could be less favorable.
News volatility: Right after headlines or earnings, prices can jump; market orders can chase that move.

When a Market Order Makes Sense

You’re trading high-liquidity stocks or ETFs during regular hours.
Your priority is execution, not a precise price (e.g., exiting a position quickly).
Your order size is modest relative to typical trading volume.

When to Reconsider

You’re trading illiquid or small-cap stocks with wide spreads.
It’s pre-market or after hours when liquidity thins out.
You care about price control—in which case, consider a limit order (you set the max you’ll pay or the minimum you’ll accept).

Conversation-Ready Example

“Hey, I used a market order to sell my shares at the open—wanted out fast. If I’d used a limit order, I might’ve missed the exit if the price dropped too quickly.”

Pro Tip

For liquid names, use market orders during regular hours (9:30 a.m.–4:00 p.m. ET) and avoid the first and last few minutes of the session when prices can be jumpy. If the spread looks wider than usual or the stock is moving fast, switch to a limit order to cap your risk.

Bottom Line

A market order is the “get it done now” tool in your trading toolbox. It’s perfect when speed matters more than precision. Use it wisely—on the right securities, at the right times—and you’ll avoid paying the “impatience tax” that comes from volatile prices and wide spreads.