Market Order vs Limit Order: When to Use Each
A market order fills immediately at the best available price. A limit order only fills at your specified price or better. Use market orders when you need to get in or out right now. Use limit orders when you want price control and can afford to wait. That’s the core difference, and choosing correctly can save you hundreds of dollars over time.
Both order types are fundamental to trading. Understanding when each makes sense is one of the first things every trader should nail down.
How Market Orders Work
When you place a market order, you’re telling your broker: “Buy (or sell) this now, at whatever the current price is.” Your order gets matched with the best available offer on the other side.
The advantage is speed. In liquid markets like SPY, Apple, or E-mini S&P 500 futures, your fill happens in milliseconds. When you need to exit a losing trade immediately, a market order is the right tool.
The risk is slippage. If a stock is quoted at $50.00 but volume is thin, your market order might fill at $50.05 or $50.10. In fast-moving markets during news events, slippage can be much worse. You could see 10 to 50 cents of slippage on volatile, low-liquidity stocks.
Best for: Exiting trades urgently, trading highly liquid instruments, and situations where getting filled matters more than getting the perfect price.
How Limit Orders Work
A limit order sets your maximum buy price or minimum sell price. If you place a limit buy at $49.50, your order only fills at $49.50 or lower. The market has to come to you.
This gives you complete price control. You’ll never pay more than your limit price on a buy or receive less than your limit on a sell. For traders who enter positions at specific support or resistance levels, limit orders are essential.
The downside: your order might not fill at all. If you set a limit buy at $49.50 and the stock only dips to $49.55 before rallying to $52, you missed the trade entirely. There’s a real opportunity cost to being too precise with limit prices.
Best for: Entering trades at planned levels, trading in wide-spread markets, scaling into positions, and any situation where you have a specific price target.
Practical Scenarios: Which Order to Use
Scenario 1: Your stop loss just triggered and you’re down 2%. Use a market order. Getting out now matters more than saving a few cents. Hoping for a better fill while the stock keeps dropping is how small losses become big ones.
Scenario 2: You’ve identified a support level at $145 and want to buy if price pulls back. Use a limit order at $145. You set it and walk away. If price reaches your level, you get filled at the price you planned.
Scenario 3: You’re trading a low-volume stock with a $0.30 spread. Use a limit order. A market order in a wide-spread stock means you’re immediately giving up $0.30 per share just on the entry. On 500 shares, that’s $150 before the trade even moves in your direction.
Scenario 4: Breaking news just dropped and you need exposure immediately. Market order. Speed wins in momentum situations. By the time your limit order sits in the book, price may have moved well past it.
Check the BullTraders glossary for more on order flow and how orders interact in the market.
Other Order Types Worth Knowing
Beyond market and limit orders, most platforms offer variations:
Stop order (stop-loss): Becomes a market order once a trigger price is hit. Useful for protecting profits or limiting losses automatically.
Stop-limit order: Becomes a limit order once the trigger price is hit. Gives you more control than a regular stop but risks not filling in a fast move.
Trailing stop: A stop order that moves with the price, locking in profits as the trade moves in your favor. Learn more about risk tools in our education section.
Key Takeaways
- Market orders prioritize speed; limit orders prioritize price
- Use market orders for urgent exits and highly liquid instruments
- Use limit orders for planned entries, wide-spread stocks, and precise levels
- Slippage is the hidden cost of market orders; missed fills are the hidden cost of limit orders
- Most active traders use both types daily, matching the order to the situation
Frequently Asked Questions
Which order type do most professional traders use? Professionals use both regularly. Many use limit orders for entries (to get the price they want) and market orders for exits (to guarantee they get out). The choice depends on the situation, not a blanket preference.
Can I change a limit order after placing it? Yes. You can modify the price or cancel a limit order anytime before it fills. This is useful for adjusting your entry as new price information develops.
Do limit orders cost more in commissions? At most brokers, no. Market and limit orders typically carry the same commission. Some ECN-style brokers actually give you a small rebate for limit orders because you’re adding liquidity to the market rather than taking it.
Risk Disclaimer: Trading involves substantial risk of loss. Past performance is not indicative of future results. See our full risk disclaimer.