How to Place a Market Order
To place a market order, check the spread first, confirm the size you already decided on, and submit. You are choosing to be filled immediately at whatever price is available, which is the right choice when execution matters more than price and the wrong one otherwise.
A market order says: fill me now, at whatever the market is. Everything good and everything bad about it follows from that single sentence.
Before you start
A size decided before the ticket is opened, because a market order removes the pause that would let you decide it. A limit order sits and waits; this one is gone in a moment.
An honest check of the spread, since that is what you are agreeing to pay. The difference between the bid and the ask is the immediate cost of immediacy.
A reason you need immediacy rather than price. Exiting a position that is wrong is a reason. Being impatient at an entry is not.
The steps
What the order ticket asks for, in the usual order: the ticker (the short code for the stock or fund), buy or sell, quantity in shares or in dollars, the order type (choose Market), how long the order lasts (Day is normal), then a review screen showing the estimated cost before you submit.
1. Look at the spread before anything else
A market order pays the full spread by design, and on a thin stock or outside regular hours that spread can be wide. A wide spread is a reason to use a different order type, and many brokers accept only limit orders outside regular hours anyway.
2. Confirm the size you already decided
If you are investing, the size is simply the amount you planned to put in. If you are trading, size comes from the stop distance and the risk figure, both worked out beforehand. A market order gives you no time to do that arithmetic once the ticket is in front of you.
3. Check the instrument is liquid enough for the size
A market order takes whatever is offered, in order, until it is filled. If your size exceeds what is resting at the best price, the rest fills worse and nothing warns you.
4. Submit and read the actual fill
Compare it against the quote you saw. That difference is your real slippage, and after twenty trades it is a number you can use rather than a feeling.
5. Attach the stop immediately, if this is a short-term trade
The whole point of speed was to be in the position. A trade with no stop for ten minutes has undone the reason you moved quickly. If you are buying a fund to hold for years, skip this step: long-term investors generally do not put stop-losses on broad funds, because a stop would sell you out during an ordinary dip that the plan was built to sit through.
6. Use it for exits without hesitating
When a position is wrong, being filled matters far more than the price. This is the situation the order type exists for, and trying to get a better exit with a limit is how small losses become large ones.
7. Log the slippage so it stops being invisible
Expected price against actual, every time. It is the only cost of trading that never appears on a statement, and it is often larger than the commission that does.
How to tell it worked
The fill was within 1 spread of the quote you saw, on a liquid instrument.
The size was fixed before the ticket opened, from the stop distance rather than from the moment.
A stop was attached within 1 minute of the fill.
And the slippage was recorded, so after 20 trades it is a measured figure.
What it costs you
You pay the spread on entry and again on exit. For a method holding twenty bars that is trivial. For one holding two bars it can be most of the expected gain, which is the arithmetic that quietly decides whether a short-horizon method can work at all.
In an illiquid instrument the quote describes one small order. A market order for more than that size walks the book, and the average fill can be materially worse than anything displayed.
When it is the right choice
Exiting a position you have decided is wrong. The decision has already been made; the only remaining question is whether it gets executed, and a limit order turns that into a maybe.
Trading a liquid instrument in normal conditions. A tight spread on a heavily traded name makes the cost of immediacy genuinely small, and the certainty is close to free.
Entering when the level is already gone and the plan allows for it. Rare, and it has to be part of the plan rather than a response to missing the entry.
When it is the wrong choice
Any instrument with a visibly wide spread. You are agreeing to pay all of it on the round trip.
The first minutes after an open, when quotes move faster than they display and the fill can land a long way from what you saw.
And any entry where the size has not been fixed. There is no pause in a market order, and the size is the one number that has to be settled before the ticket opens.
The original data
Of the 24,971 unique videos collected for this site’s search study, 6 mention this order type in the title, at a median of 177,290 views across 6 channels, and stop orders appear in another 6 at 86,967. Limit orders and order types generally have similarly thin coverage. Repeat appearances of the same video count once.
6 videos at a 177,290 median. Almost no coverage and an enormous audience per video, which is the signature of a subject everybody needs and almost nobody teaches — the mechanism sitting underneath every strategy that does get taught.
The question: The limit did not fill and price ran. Market in?
The answer is that the setup you planned had an entry price, and chasing it with a market order keeps the original stop while spending part of the distance to it. That is a different trade with worse arithmetic, wearing the same name as the one you planned.
When it fails
The failure is chasing, and it feels like decisiveness. The limit sits unfilled, price moves away, and a market order gets you in. The stop stays where the plan put it, so the distance you are risking is now larger and the distance to the target is smaller. Nothing about the trade was reconsidered — the arithmetic simply got worse while the position looked like the one you intended.
The second failure is using one in a wide spread. You agreed to pay all of it.
A third is a size that exceeds the resting depth. The order walks the book.
A fourth is entering before the size is fixed. There is no pause in which to decide.
A fifth is delaying the stop. Speed was the reason for the order type.
And a sixth is never measuring slippage. It is the cost that appears on no statement.
Related
Market order covers the mechanism in detail. Limit order is the alternative when price matters more than the fill. And order types sets out the full set and what each is for.
I use them to get out and rarely to get in. Getting out is a decision where being filled is the point, because the position is wrong and I want it gone. Getting in is a decision where a few cents matter, since the stop distance is fixed and the entry price sets how much of it I am spending.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.