What Is Market Order?

When a market order is placed, the exchange matches the order in sequence with the limit orders waiting on the opposite side of the order book. On the buy side, it starts from the lowest sell price; if the quantity at that level is not enough, it moves to the next, more expensive level. For this reason, a large market order can be filled at multiple price levels, and the average execution price can differ from the last price seen on screen.

For example, if the order book has 5 units for sale at 100 dollars and 5 units at 101 dollars, and a market buy order for 10 units is placed, the average cost is 100.5 dollars. This difference is called slippage. Because market orders consume liquidity in the order book, on most exchanges they are subject to the 'taker' fee, which is usually higher than the 'maker' fee.

A market order is preferred when speed matters more than price, for example when you need to exit a position quickly. However, with low-liquidity coins or during sharp price moves, it can be filled at prices very different from what you expected. When price control matters, a limit order can be used, and for automatic exit at a certain level, a stop-loss order can be used.