Market Order
Explanation: A market order is a buy or sell order to be executed immediately at the current market price. It guarantees execution but not the execution price. Market orders are typically used when the priority is to execute the trade quickly rather than to secure a specific price.
Example: An investor wants to buy 100 shares of Company XYZ as quickly as possible. They place a market order, which executes immediately at the current market price, say $50 per share. The total cost of the transaction is $5,000.
Reference Link: For more information on market orders, visit Investopedia’s Market Order.
FAQs:
- What are the advantages of a market order?
- The primary advantage is the immediate execution of the trade.
- What are the disadvantages of a market order?
- The execution price may differ from the expected price, especially in volatile markets.
- When should I use a market order?
- When the priority is to execute the trade quickly rather than to achieve a specific price.
- How does a market order differ from a limit order?
- A market order executes immediately at the current price, while a limit order executes only at a specified price or better.
- Can market orders be used for all types of securities?
- Yes, market orders can be used for stocks, bonds, options, and other securities.