Reviewed by Gotrade Internal Analyst
When you buy or sell a stock, your broker asks: market order or limit order? If you choose wrong, you might get filled at a price that surprises you.
This article explains what a market order is, how it works, when it makes sense, when it does not, and why it can be risky in low liquidity or during pre market and after hours trading.
What Is A Market Order?
A market order is an instruction to buy or sell a stock immediately at the best available price in the market.
You are telling the market:
“I care more about getting the trade done now than about the exact price.”
- A market buy order fills against the lowest ask prices available.
- A market sell order fills against the highest bid prices available.
You do not set a specific price. Instead, you accept whatever the market is offering at that moment.
How Market Orders Work In Practice?
When you tap “Buy” with a market order:
- Your broker looks at the current order book.
- It matches your order with existing sell orders (asks) at the top of the book.
- If your order is bigger than the first ask, it keeps matching with higher prices until it is fully filled.
This is why you may see a different execution price than the last traded price you saw on screen, especially in fast or thin markets.
Market Order Vs Limit Order
It helps to compare a market order with a limit order.
- Market order
- Priority: execution
- You say: “Fill me now at the best price available.”
- Risk: you do not control the final price.
- Limit order
- Priority: price
- You say: “Only fill me at this price or better.”
- Risk: if the market never reaches that price, you may not get filled.
For most long term investors, limit orders give more control. Market orders are mainly about speed.
Pros Of Using Market Orders
1. Fast and simple
Market orders are straightforward. You do not need to think about price levels, you just decide how many shares or how much money you want to trade.
2. High likelihood of execution
As long as there is reasonable liquidity, your order will almost always be filled quickly. You avoid the frustration of unfilled limit orders.
3. Useful for small, liquid trades
If you are buying a modest amount of a highly traded stock like Apple or Microsoft during regular market hours, the spread is usually tight and slippage minimal.
Cons And Risks Of Market Orders
1. No control over final price
You might see a quote at 100, hit “Buy”, and end up filled at 100.30 or higher if the price moves or the order book is thin. That difference is called slippage.
2. Vulnerable to wide bid ask spreads
If the spread is wide, your market order can land closer to the more expensive side of that gap, instantly putting you at a loss on paper.
3. Dangerous in low liquidity stocks
In thinly traded names with few orders in the book, a market order can “walk up” or “walk down” the book and get filled at much worse prices than you expected.
4. Risky in pre market and after hours
Outside regular hours:
- Fewer participants
- Wider spreads
- Thinner order books
A market order during these times can result in very poor fills compared with waiting for the main session.
Practical Tips For Using Market Orders
If you decide to use a market order, a few habits can reduce surprises:
1. Check the bid ask spread
If the spread is just a cent or two on a large cap stock, a market order is usually fine for small trades. If it is wide, consider a limit order instead.
2. Look at average volume
Higher daily volume generally means better liquidity and smaller slippage.
3. Avoid using them at the open or in fast news spikes
The first minutes after the open and moments after big news can be chaotic.
Prices can jump quickly, and market orders may fill far from the level you saw on screen.
4. Consider limit orders as your default
For most retail investors building long term positions, using limit orders at a price you are comfortable with is a simple way to control execution.
Conclusion
A market order is the simplest way to buy or sell a stock: you ask to be filled at the best available price right now. The trade off is speed versus control. You gain quick execution but give up certainty about the final price.
Market orders can work well for small trades in highly liquid stocks during normal hours. They become much riskier in low liquidity names, wide spreads and pre market or after hours sessions.
As a retail investor, make market orders the exception rather than the default. Use them when speed truly matters, and rely on limit orders to control your entry and exit prices as you build your long term portfolio.
Apps like Gotrade make it easy to place both market and limit orders on US stocks and ETFs with small amounts, so you can choose the order type that fits your strategy and risk comfort.
FAQ
- Is a market order always executed immediately?
Usually yes, as long as the market is open and there is enough liquidity. - Are market orders bad for beginners?
Not always, but beginners often underestimate how much prices can move. - Should I ever use a market order after hours?
It is generally safer to avoid market orders in pre market or after hours sessions because spreads are wider and liquidity is lower.
Reference:
- Corporate Finance Institute, Market Order, 2026.
- Investopedia, Market Order: Definition, Example, Vs. Limit Order, 2026.
Disclaimer:
Gotrade is the trading name of Gotrade Securities Inc., which is registered with and supervised by the Labuan Financial Services Authority (LFSA). This content is for educational purposes only and does not constitute financial advice. Always do your own research (DYOR) before investing.
