The difference between a market order and limit order?

Modified on Thu, 05 Jul 2018 at 03:44 PM

When an investor places an order to buy or sell a stock, there are two fundamental execution options: place the order "at market" or "at limit." Market orders are transactions meant to execute as quickly as possible at the present or market price. Conversely, a limit order sets the maximum or minimum price at which you are willing to buy or sell.

Buying stock is a bit like buying a car. With a car, you can pay the dealer’s sticker price and get the car. Or you can negotiate a price and refuse to finalize the deal unless the dealer meets your price. The stock market works in a similar way.

A market order deals with the execution of the order; the price of the security is secondary to the speed of completing the trade. Limit orders deal primarily with the price; if the security's value is currently resting outside of the parameters set in the limit order, the transaction does not occur.


Source : Investopedia


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