A market order is an instant order placed to buy or sell a coin immediately at the current market price. Market orders are usually placed by traders if they want to be sure that a trade is completed without getting delayed in the order queue.
A Market order needs liquidity to be filled. This means that it is fulfilled based on the limit orders already placed on the order book. If you want to buy or sell immediately at the current market price, setting a market order is your best option.
For example, if you notice that the price of Bitcoin might be increasing, and you want to buy it immediately, you could buy at the market’s price so that you can purchase Bitcoin instantly to get in on time. In this case, you’d make a market order on your chosen exchange.
When to use a market order?
Market orders are useful when getting your order filled is more important than buying or selling at a specific price. This means you should only use market orders if you are willing to pay a higher cost caused by the slippage. In other words, market orders are helpful if you’re in a rush.
But if you’re not a complete beginner to crypto trading and want to purchase some altcoins with your Bitcoin, avoid using a market order. This is because you might pay more than you ought to. A limit order is a better option in this case.
However, when you’re trading highly liquid assets with a thin bid-ask spread, a market order will give you a price close to or at the expected spot price. Assets with a larger bid-ask spread have a much higher chance of causing slippage which could make you pay more than necessary using a market order.