Differences Between Market and Limit Orders

A market order can be defined as an order to buy or sell instantly at the best available price. These orders are executed immediately and therefore there is no assurance that they will be executed at which price and that price can differ from the price at which order was put into the system because in stock market in seconds price changes and there is time lag of some seconds in order placement and order execution. These type of orders are placed by retail or individual investors who want buy or sell a stock without delay, and also as they are long term investor they do not worry about small deviation in the price of stock which arises due to placing of market orders.

Limit orders are different from the market order in the sense that in limit order one sets the maximum or minimum price at which he or she is willing to buy or sell the stock. For example, if one wants to buy a stock at $50, he would enter a limit order for this amount. This means that his order will be executed only at $50 or less. Even if the stock touches $50 .01 then also his order will not be executed due to limit of $50 set by him. These types of orders are preferred by traders who transact daily in stock markets.

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