Difference Between Market and Limit Orders

1. Definitions

Market orders involve buying or selling an order at the best price in the current market, ensuring immediate execution to achieve swift transactions.

Limit orders involve users specifying both the quantity of their order and either the maximum price they’re willing to pay for buying or the minimum price they're willing to accept for selling. These orders are executed only when there are matching orders from counterparties in the market within the specified price range.

2. Ways to Place Orders

For market orders, there is no need to set the buy or sell price. Instead, you simply enter the order amount to proceed. 

When placing limit orders, specifying both the buying or selling price and the order amount is necessary.

3. Execution Timings

Market Order: Market orders are executed immediately at the best available market price upon placement by the user.

Limit Order: Limit orders are executed when a specific price, or a better one, is reached after the order is placed by the user.

4. Precautions:

● Market Order

Market orders may result in partial fills or no fills at all. In such cases, any unfilled portion will automatically be canceled.

● Limit Order

The limit buy price cannot be higher than 110% of the last price, and the limit sell price cannot be lower than 90% of the last price.

For a limit buy order, the actual execution price will be less than or equal to the specified limit price, but it will not exceed it. For a limit sell order, the actual execution price will be greater than or equal to the specified limit price, but it will not be lower than it.