A market order, the most frequently placed order type, is an instruction
to buy or sell a stock at the best available price at the time that
the order is executed. If you obtain a price quote for Intel stock, for
example, and place an order to buy 100 shares without specifying
the price, it is a market order. Market orders are given priority in
the communications systems of brokerage firms, so the stock is
purchased before the price changes much. Market orders generally
are executed within seconds of being placed. In a few situations, a
market order may not be executed—when curbs are in effect on the
exchange floor, for example, or when the trading of that particular
stock has been halted for some reason.
The good news is that market orders are filled soon after they
are placed. The downside is that you do not know in advance the
price at which the order will be executed. The order generally is
executed at or close to the quoted price because of the order’s
prompt execution. However, if the stock is actively traded at the
time the order is placed, some price deviation from the quoted
price may take place. For example, a market order placed to buy
a newly issued stock that begins trading for the first time on the
secondary market might be executed at a much higher price than
the offering price. When a fast-moving market occurs for a particular
stock or stocks, a market order can be transacted at a significant
price discrepancy from the quoted price.
These fast markets have a bearing on online trading. Even
if investors receive real-time quotes, a market order might not
keep pace with those real-time quotes. By the time an order is
placed online, the market may have moved considerably, making
the quote that is received only an approximation of what is happening.
Because market orders are executed on a first-serve basis, if
numerous orders are already ahead of the one that is placed, the
execution price can be significantly different from the quoted price.
In this type of market, you should use limit orders to protect against
the risk of large price deviations.
A market order is usually a day order, which means mean that
it expires at the end of the day if it is not executed by then.
Categories in Trading Mistakes
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Using too much Leverage
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Failure to control Risk
Refusing to employ effective risk control measures can ensure your long-term failure
Lack of Discipline
A lack of discipline can destroy even the most talented and best prepared trader
Useful Advices to Beginning Trader
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