Market Orders

A market order is an order to immediately buy or sell a security at the best available current price. It is the fastest way to execute a trade, as it prioritizes execution speed over a specific price.

How Market Orders Work

When you place a market order, your broker immediately sends it to the exchange. The order is then filled at the best available bid (for a sell order) or ask (for a buy order) price from the market makers and other participants.

Example

Suppose you want to buy 100 shares of Company XYZ.

If you place a market order to buy 100 shares:

1. Your order will first look at the lowest available ask price, which is $50.05.

2. Since there are 200 shares offered at $50.05, your entire order of 100 shares will be filled at this price.

If you placed a market order to buy 250 shares:

1. Your order would first fill 200 shares at $50.05.

2. The remaining 50 shares would then be filled at the next lowest ask price, which is $50.10.

In this scenario, your average purchase price would be: ((200 shares * $50.05) + (50 shares * $50.10)) / 250 shares = $50.06.