Market Orders Explained

A market order is used to immediately purchase or sell an asset in the market at the current price.

Key Takeaways:

• A market order is an instruction traders place to buy or sell an asset, such as a stock or a cryptocurrency, immediately at the current market price.

• With a market order, you agree to buy or sell at whatever price is available for the asset.

• Market orders can be simple but very risky. It’s best that you familiarise yourself with how it works.

When the market is favourable, traders take advantage of this order to execute trades almost immediately and lock in gains. Keep reading the article to understand how a market order works and its drawbacks.

What is a Market Order?

A market order is an instruction that a trader puts in front of their broker to buy or sell an asset such as a stock or a cryptocurrency immediately at the current market price. It's a simple, straightforward order. Traders use this order to buy/sell immediately, without waiting for the market to adjust to any other price point.

With a market order, you agree to buy or sell at whatever price is available. The exchange matches your market order with someone else's open order in the order book. Here is a simple example of how it works:

For example, you want to buy 0.1 Bitcoin (BTC) on an exchange. The current price of Bitcoin is $50,000. You decide to place a market order. Enter the quantity as 0.1 BTC and hit the 'Buy' button. Immediately, your order is matched with someone selling 0.1 BTC at $5,000. Your order is executed, and now you own 0.1 BTC.

How to Place a Market Order?

Placing a market order can be pretty complicated for novice traders. Not to worry, here is a quick guide to help you get started:

• Pick a Trading Platform

This is a no-brainer step. Market Orders are a set of instructions placed by traders while using a trading platform to place a trade. Market orders only work when using a trading platform to trade. Various exchanges allow their users to place market orders while trading. Getting started with the BitDelta exchange is as simple as ABC. All you must do is create an account by registering on the exchange. Complete the Know Your Customer (KYC) procedure, and you’re all set to begin trading!

• Fund your Trading Wallet

Once you are done setting up your account, next find your trading wallet. You can fund your trading account via your bank account or another crypto wallet. BitDelta gives you the option to find your wallet via fiat or crypto.

• Choose the Crypto Pair to Trade

Now that you are done with funding your wallet, it's time to choose the crypto pair you want to trade.  Most traders go for BTC/USD, ETH/USDT, SOL/USDT, MATIC/USDT, or XRP/USDT, as they are popular cryptocurrencies for trading. However, it is advised to research the coin you want to use by conducting a fundamental analysis of the coin before using it to trade. By doing this, you will be more confident in the coin's performance in the market.

• Place your Order

Once the market is where you are comfortable to buy, you can place your market order. Use the option available on the exchange to place a market order at the price you want. Here is an overview: Suppose you want to buy Bitcoin (BTC) on BitDelta.

• Login to your BitDelta account.

• Go to your trading wallet.

• Select the BTC/USDT trading pair.

• Change the order type from limited order to market order.

• Enter the amount of Bitcoin you want and click the "Buy" button.

Once this is done, the order will be executed at the current market price, and you will get the amount of BTC you ordered almost immediately.

When Do Traders Place Market Orders?

Market orders are placed at different strategic times by traders.

• Rapid Price Movements

Traders use market orders when cryptocurrency prices are changing fast, and they need to act quickly. For example, if Bitcoin's price is rising rapidly, a trader might use a market order to buy it before the price goes even higher. Similarly, if the price is falling fast, they might use a market order to sell and avoid losing more money.

• Immediate Transaction

Market orders are used when traders are content with the current price of a cryptocurrency and want to buy or sell it right away. For instance, if someone thinks Ethereum's price is fair and wants to buy it immediately, they'd use a market order to make the trade.

• Handling Large Trades

Market orders are chosen when traders need to make a big trade. If they deal with a substantial amount of cryptocurrency, they might not want to wait for a specific price to buy or sell. Instead, they use a market order to get the trade done fast, even if it means the price isn't perfect.  

• Why Are Market Orders Important?

Traders use market orders when trading crypto in the market for multiple reasons:

• Speed and Ease

Market orders allow traders to buy or sell cryptocurrencies instantly without waiting for the market to increase or decrease in price. This speed is essential in the crypto market, where prices change in the twinkle of an eye.

• No Need for Price Setting

With market orders, traders don’t need to set a specific price. They can enter the amount of cryptocurrency they want to buy or sell, and the order will be executed at the best available price.

• Liquidity Utilisation

Market orders make use of the liquidity in the order book. This means traders can easily buy or sell large quantities of cryptocurrency without significantly affecting the market price.

• Adaptability to Market Conditions

Market orders are suitable for various market conditions. Whether the market is rising, falling, or staying stable, traders can use market orders to execute their trades efficiently.

• Simplicity for Beginners

Market orders are straightforward to understand, making them ideal for beginners in crypto trading. Traders don’t need to worry about setting complicated parameters or understanding complex trading strategies.

• Flexibility in Trading Strategy

Market orders can be part of different trading strategies. Traders aim to capitalise on short-term price movements or make long-term investments. Market orders provide the flexibility to execute trades according to their strategy. 

What Are the Drawbacks of Market Orders?

There are some drawbacks to market orders that traders need to be aware of:

How is a Market Order Different from a Limit Order?

• A market order and a limit order are two of the most common types of trading orders. Yet, the two are very different in their functions and purposes.

• A market order is placed to execute an order immediately at the current price. A limit order is placed to execute an order at a specific price.

• A market order gets executed immediately if the crypto token is liquid enough; otherwise, it can take a little time. A limit order gets executed whenever the market reaches that condition when the crypto token hits the price you have asked for.

• A market order is easier to place than a limit order, as the former is simple and quick.

What BitDelta Traders Should Know

Successful trading in the crypto market includes understanding how to manage risks with the help of various tools and orders available in the market. Market orders seem simple but can be very risky if you are unfamiliar with the way the market works. We suggest that traders should do their due diligence before placing an order while trading.

Consider the fees associated, the price volatility of the token, and the risks associated with the trade. Also consider what kind of trading order would be appropriate for you to place for a token. For a beginner, a market order is the easiest to place as it’s simple and immediate.

Frequently Asked Questions (FAQs)

1. What is a market order?

A market order is an instruction that a trader gives to their broker to buy or sell an asset, such as a stock or a cryptocurrency, immediately at the current market price.

2. How does a market order work?

A trader uses a market order to buy or sell an asset immediately. With a market order, you agree to buy or sell the asset at whatever price is available. The exchange matches your market order with someone else's open order in the order book. This is how your trade gets executed with a market order.

3. Which is better, market order or limit order?

Comparing a market order and a limit order isn’t proper. Both have their functions and purposes.

While a market order executes an order at a current price, a limit order executes an order at a certain price whenever the market reaches that condition.

For a beginner, a market order is easier to place due to its simplicity and immediacy.

4. What are the advantages of a market order?  

The chief advantages of a market order are:

• Speed

• Ease

• Flexibility  

• Simplicity for beginners  

• No need for price setting

• Liquidity utilisation  

• Adaptability to market conditions

5. What are the disadvantages of a market order?  

There are some disadvantages of market orders that traders need to be aware of:

• Order execution risk

• Price slippage

• High fees

• Potentially adverse for price-sensitive traders

• Dependence on liquidity

• Lack of control

• Limited price control

6. How long do market orders take to fill?

It depends on the liquidity of the stock you are trading. If a stock is highly liquid, its market order is almost always filled immediately. Otherwise, it can take its market order longer to fill.

7. Does a market order expire?

No, a market order doesn’t expire. It almost always gets executed immediately.

8. How can I place a market order on BitDelta?

Follow these steps to place a market order on BitDelta:  

• Login to your BitDelta account.

• Go to your trading wallet.

• Select the BTC/USDT trading pair.

• Change the order type from limit order to market order.

• Enter the amount of Bitcoin you want and click the “Buy” button.

9. When should I not place a market order?

You shouldn’t place a market order when you are planning to execute a trade at a particular price. You should place a market order only if you are looking to execute a trade immediately.