What is the difference between a market and limit order?

Question

I was just curious what the difference was between a market and limit order?

Answer 1

Ok, here's the scoop, with a few more examples in anticipation of your next possible question.

Let's say PCU is at $90. I have a limit order to sell at $92. If it gets to $92 or higher, I'll get my order filled. That's one of the most common uses for a limit order, to sell a stock/option at a price you designate.

On a market order, you put your order in, and whatever the price is at that moment is what you get, whether it's 91, 92, or whatever. Limit orders work out pretty nice if the stock pops up to your limit price.

The rub is when the stock is dropping. Say the market turns down, like today and what was up at 95 is now dropping fast. Well you see it at 94.40 by 94.60 (bid/ask) and put in an order to sell at 94.50, but the stock is moving too fast, so your order is not filled. by the time you put in another order, it could be at 94.20 by 94.30. With a market order, you're out right away (in this case at 94.40).


On the buy side, it works the other way around.

If you put in a limit order to buy at $88, you only get filled if the market maker can fill you for $88 or less.

If you put in a market order to buy at market, you get filled at whatever the rate price is at that time. This is good if you're trying to get in on a stock that's moving big like NOV or something moving on news, but really bad (or can be) if you put in a market order overnight because in the morning, the market maker takes a look at all the buy and sell orders and may move the price to start the day, so you might get filled at $92 if there are a lot of buy orders, then the price will drop as demand drops and suddenly you're already in the hole, to start the day.

If you have other questions, please just let me know.

Hope that helps!

Answer 2

first off. you place an order to buy or sell a stock. when you place a market order u are paying for the stock at the price its at right then. when you place a limit order you put a price in that you think the stock will go low enough to hit.

for instance..... say stock "x" is trading at 20.15 and you want to buy it. when you place a market order for it you will pay 20.15 for it.
but say you think 20.15 is an expensive price for it and you would rather pay only 19.95. then you would place a limit order in at 19.95 hoping it will go that low and hit your limit. if it does go that low then you pay 19.95 for it.

Answer 3

A. Limit orders are used to buy or sell securities at a specified price, which can be equal ...

Answer 4

Market order..."I'll take the next price the stock trades at"

Limit order..."I'll sell (buy) the stock to you (from you) at $XX.xx price or better"

Answer 5

Market: They set the price.
Limit: You set the price.