{"id":8040,"date":"2022-11-22T17:17:54","date_gmt":"2022-11-22T15:17:54","guid":{"rendered":"https:\/\/learn.thndr.app\/?p=8040"},"modified":"2024-07-31T13:18:52","modified_gmt":"2024-07-31T11:18:52","slug":"market-vs-limit-order","status":"publish","type":"post","link":"https:\/\/thndr.horizondm.com\/learn\/market-vs-limit-order\/","title":{"rendered":"Market vs limit order"},"content":{"rendered":"\t\t
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It\u2019s a chill Friday morning. You asked your brother to get you some fresh meat from the butcher\u2019s market. There are two scenarios in this case: you can either tell him to buy 5 kilos of meat at any given price, OR buy 5 kilos of meat at a specific price.\u00a0<\/span><\/p>

The same goes when placing an order in the stock market. I\u2019m not kidding. There are two types of orders: market order and limit order. Let\u2019s dive right in.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Market Order: Immediacy over Price<\/span><\/h3>

Market orders put immediacy over price, which means that your order is placed right away regardless of the stock\u2019s price. It is instantly executed at the best available market price. Investors usually place market orders when they want to buy or sell a stock instantly.<\/span><\/p>

Let\u2019s take an example. You wish to buy 200 stocks immediately. People who are selling this stock were asking (aka asks) for EGP 20, and others wanted to buy it (aka bids) for EGP 18. Your friend, Atef, was selling 100 of this stock for the asking price (EGP 20). So, if you have placed a market order for 200 stocks, half of your order will be executed instantly for EGP 20. What about the rest? The other half of the stocks will be bought at the market price. It could be as high as EGP 25 or as low as EGP 18. It all depends on the market. In other words, you don\u2019t have to necessarily buy the 200 stocks with the same price, if it\u2019s a market order.\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t

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As the order is executed at the market price, the market should be open, right? Nope, not necessarily. You can place a market order outside market hours. Yet, it will be executed at the market\u2019s open price – which is the price at which the stock will be bought or sold upon the opening of the trading day.\u00a0<\/span><\/p>

It\u2019s important to point out that you can\u2019t cancel a market order, since it gets executed immediately.\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Limit Order: Price over Immediacy<\/span><\/h3>

Limit orders put price over immediacy. In other words, you set a limit on the price you\u2019re willing to pay or accept for a given stock. It\u2019s like an instruction to buy or sell a stock only at a specific price.<\/span><\/p>

Buy limit orders<\/span><\/h4>

Let\u2019s say that you wish to buy a stock for EGP 10, so you place a limit order with your desired price. In other words, you\u2019re instructing the system to execute your order at a maximum price (or less). Yet, the current market price for the stock is EGP 15. Hence, the order will not get executed unless the price falls off to EGP 10 or less. Then and only then, your buy order will be executed.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Sell limit orders<\/span><\/h4>

Let\u2019s take the same example but for selling. Imagine that you wish to sell a stock for EGP 20, so you instructed the system to execute your order at a minimum price of EGP 20 or more (aka you placed a limit order). So, your order will only get executed when an investor is willing to buy your stock for EGP 20 as a minimum.<\/span><\/p>

Yet, what if the market didn\u2019t reach your desired price? The rule is simple. If the market doesn\u2019t align with your limit buy or sell price, then your order will not be executed.\u00a0<\/span><\/p>

Will it be pending forever? Nope, not really. When you place a buy or sell limit order, you have three options:\u00a0<\/span><\/p>

\u00a0<\/span><\/p>

Option #1: Good till cancel\u00a0<\/span><\/h4>

Good till cancel (GTC) means that in case your placed order didn\u2019t get executed, it will remain active until you cancel it.\u00a0\u00a0<\/span><\/p>

Option #2: Good till day\u00a0<\/span><\/h4>

Good till day means that your order will be active for one day, or to be more specific for one trading session unless it has already been cancelled or executed.\u00a0<\/span><\/p>

Option #3: Good till date\u00a0<\/span><\/h4>

This simply means that your order will remain active until a specific date that you determine in advance.\u00a0<\/span><\/p>

Unlike market orders, limit price orders can be canceled at any given moment.\u00a0<\/span><\/p>

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Wrap-up<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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It\u2019s a chill Friday morning. You asked your brother to get you some fresh meat from the butcher\u2019s market. There are two scenarios in this case: you can either tell him to buy 5 kilos of meat at any given price, OR buy 5 kilos of meat at a specific price. The same goes when […]<\/p>\n","protected":false},"author":9,"featured_media":8041,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[447],"tags":[80,92],"class_list":["post-8040","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-everything-else-investing-en","tag-investment","tag-stock-market"],"_links":{"self":[{"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/posts\/8040","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/comments?post=8040"}],"version-history":[{"count":2,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/posts\/8040\/revisions"}],"predecessor-version":[{"id":20357,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/posts\/8040\/revisions\/20357"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/media\/8041"}],"wp:attachment":[{"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/media?parent=8040"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/categories?post=8040"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thndr.horizondm.com\/learn\/wp-json\/wp\/v2\/tags?post=8040"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}