Definition
The term market order refers to instructions sent to a broker to buy or sell a security immediately at the best available price. Since there are no restrictions on the selling or purchase price of the security, a market order is oftentimes immediately executed.
Explanation
Also known as an unrestricted order, a market order is typically used in the context of buying or selling shares of stock. A market order instructs the broker to buy or sell a predetermined amount of securities at the prevailing market price. Unless otherwise specified by the investor, the default option when selling or buying securities is a market order.
Unless trading on the stock has been suspended, the execution of a market order is guaranteed in that the shares will be purchased or sold. However, since the order is at the prevailing market price, the price paid or received is not guaranteed and may be very different than what the investor believes is the current market price or the last quote seen. For this reason, market orders can be very risky in fast moving or volatile markets. Investors can place limit orders to reduce this risk, since they allow some control over the price at which the transaction occurs.
Related Terms
The term All-or-None order refers to broker instructions to buy or sell a quantity of securities in their entirety, or none at all. If an All-or-None order cannot be executed immediately, it remains open until it is executed or is closed at the end of the trading day.
Moneyzine EditorJanuary 5th, 2024
The term Fill-or-Kill refers to broker instructions to buy or sell a security immediately, and in its entirety, or cancel the order. From a practical standpoint, a Fill-or-Kill order specifies the instruction will remain active for several seconds before being filled or canceled.Moneyzine EditorJanuary 18th, 2024
The term Good-Til-Canceled refers to broker instructions to buy or sell a security at a fixed price, and the order will remain active until the investor cancels it or it is filled. From a practical standpoint, a Good-Til-Canceled order specifies the instruction will remain active even if it is not filled on the same trading day.Moneyzine EditorJanuary 19th, 2024
The term Immediate-or-Cancel refers to broker instructions to buy or sell a security instantly, or cancel the order. From a practical standpoint, an Immediate-or-Cancel order specifies the instruction will remain active for several seconds before being filled or canceled.Moneyzine EditorJanuary 19th, 2024- The term stop order refers to instructions sent to a broker to buy or sell securities once the security reaches a specified price. When the price point on a stop order is reached, it is converted to a market order.Moneyzine EditorSeptember 21st, 2023
- The term National Best Offer refers to the lowest available ask price, which is a consolidated value from all of the national stock exchanges. The National Best Offer is the lowest price sellers are willing to accept for a security such as a stock.Moneyzine EditorSeptember 20th, 2023
- The term National Best Bid refers to the highest available bid price, which is a consolidated value from all of the national stock exchanges. The National Best Bid is the maximum price buyers are willing to pay for a security such as a stock.Moneyzine EditorSeptember 20th, 2023
The term limit order refers to instructions sent to a broker to buy or sell securities at a specific price or better. Since a limit order is not a market order, there is no guarantee the transaction will occur.Moneyzine EditorJanuary 23rd, 2024
The term day order refers to broker instructions to buy or sell a security that automatically expires at the end of the trading day if not executed. Unless specified by the investor, the default orders to buy and sell stocks at most brokerage houses are day orders.Moneyzine EditorJanuary 15th, 2024- The term One-Triggers-the-Other refers to instructions sent to a broker that consist of a primary order and a secondary order, which becomes active only if the primary order is executed. One-Triggers-the-Other orders can save a trader time, since they can pair together an order to purchase stock at a certain price and sell it at another.Moneyzine EditorSeptember 20th, 2023
- The term One-Cancels-All refers to instructions sent to a broker that consist of several active limit orders; in the event one is filled, the remaining orders are automatically inactivated. One-Cancels-All provides traders with the ability to select from one of several stocks at their desired strike price.Moneyzine EditorSeptember 20th, 2023
