Definition, How It Works, Pros & Cons

• Market orders are instructions to your broker to buy or sell a security as soon as possible.
• A market order is typically guaranteed to go through, although it doesn’t guarantee the price of the security you’re buying.
• With a market order, the final price of your trade will be set by the market.
• Visit Insider’s Investing Reference library for more stories.

When you buy or sell a stock, bond, or mutual fund, you have to decide how you’d like your broker to execute on that trade. A market order is the most popular — and default — option for ordinary people who want to buy or sell stocks or other securities. 

A market order is an order an investor gives to their broker to buy or sell a stock, bond, or other security as soon as possible. Compared to other types of orders, like limit orders or stop-loss orders, a market order is a good choice for investors who are sure they want to buy or sell the security right away.  

How do market orders work? 

When you tell your broker to buy or sell stocks for you, whether that’s by clicking the trade button on your broker’s website, or by calling your broker over the phone, you’ll usually able to choose between a few different options for how to submit your trade. If you’re using an online brokerage, those different options might appear under the header “order type,” when you go to submit your trade. Depending on your brokerage, you may be able to choose between having your trade executed as a market order, a limit order, a stop order, a stop limit order, or even a trailing stop order.

If you submit a market order to your broker to buy or sell a stock, bond, mutual fund, or other security, your broker will execute the trade immediately if the market is currently open, or upon market opening if the market is currently closed. 

With a market order, you’re not guaranteed a specific price. The price will be set based on what’s available in the market at the time your order is fulfilled; it’s called a “market” order because the market sets the price. 

With a market order, the market price could be higher or lower than the last traded price you see on the website. If the price of the stock is volatile, or if you’ve placed your order when the market is closed, the price could swing significantly. This means if you submit a market order, you might spend more money than you were expecting to buy a stock, or you might earn less…