What Is Market Order? How Does It Work in the Crypto Market?

Trading Made Easy 2022-07-25 14:25:24

Market order is a trading command. When a market order is placed, it will be settled by the platform.


A market order is a basic buy or sell command made by an investor to a broker, asking them to sell or purchase financial assets such as bonds, stocks, or cryptocurrencies at best possible market price. Investors that place market orders do so, seeking fast execution rather than specific financial asset prices.


What is a Market Order?

A market order is the default trading command for instantaneous trades. Usually, market order prices are similar to the rates that investors see in their trading charts. Market orders are simple to set. All that you need to do is hit a sell or buy button on your trading platform’s spot trading tab.


What Does Market Order Mean in Investment Circles?

A crypto market order is a buy or sell command. Whenever you place a market order, you show your willingness to buy or sell assets at the market maker's set price.

Traders that place market orders want their buy or sell orders settled as quickly as possible. Consequently, they do not set any price offers or bids. All that they want is to get in and out of the market as fast as possible, and beggars are not choosers. Therefore, they will set market orders and accept the prices set on order books. Investors and traders seeking a hedge from an asset's price movement often place market orders.


Why Are Market Orders So Important?

Market orders are crucial to the spot market because their users are ready to give up their edge in trade for reasonable prices. On top of this, traders that place market orders are not looking for free trades. They need fast trading execution to meet their trading goals. Consequently, market orders have a transaction charge. These traders pay a fee to access liquidity. To this end, market orders are a vital element of the spot market. 


They are crucial to the health of the symbiotic relationship that exists between a spot market’s liquidity providers and market order traders.


Where Are Market Orders Placed?

Market orders are common buy and sell requests in spot trading. Spot trading is the sale and purchase of financial assets and instruments. It takes place in spot markets. Spot market systems settle most market orders instantly. A spot market, like any open market, has different types of traders.


Types of Traders in a Spot Market

There are two main types of traders in a spot market, as listed below.


Market Makers

The spot market has market makers that bring in liquidity in the form of financial assets. Market makers can be buyers or sellers. They purchase or sell financial assets at the best offer or bid. Consequently, market makers ‘make’ a market that reflects the buy or sell price they set. 


Brokers use their assets to execute market order trades. Most market makers are short-term traders and are in it to earn a profit from the spread. They are also arbitrageurs. 


Market Takers

Market takers visit spot markets seeking liquidity. They want their buy or sell orders settled as quickly as possible and so set market orders.


Are There Other Trading Orders?

Aside from the market order, there are two other basic order types that all traders should be aware of. Please note that the market order, the stop market order, and the limit order have different trading outcomes, so you should use each of them as a means to end. They are tools you can leverage to meet your trading goals.


Limit Order

The spot market’s liquidity providers place limit orders. Limit orders are a command to sell or buy assets at a pre-set price. These commands will only execute when cryptocurrencies are transacting at the limit price.


Stop Market Order

A stop market order is a buy or sell command that executes when a financial asset trades at a specific price in the future. This set price is the stop price.


What Does Market Order Mean in Crypto?

Market orders are basic cryptocurrency trading orders. Use them to make a quick sale or purchase by simply clicking a buy/sell button. The automated platform will settle your order instantly by seeking the nearest market maker's ask price.


As an illustration, set a Bitcoin market order, and the automated platform will sell your BTC at the nearest market bid price. Essentially, you are buying your BTC at the price that other traders have set.


Market vs. Limit Order in the Crypto World

Limit orders are the mainstay of the crypto spot markets. Most traders use them for trading safely and steering clear of unprofitable prices. Limit orders will give you price control as a trader. Use them to set ask or bid price ceilings, especially when trading low cap crypto assets that may have substantial bid-ask spreads.


How To Use Market Orders

Use market orders when you want your order executed at the current market price. As an illustration, use a bitcoin market order to buy or sell your BTC when its current price range is just right for price advantage.


Set a crypto market order and make a quick buy or sell transaction before there are price changes. Your Bitcoin market order can help you exit or enter a position quickly and avoid losses or make a profit.


For this reason, place your market orders when the market is at its busiest and most liquid. Additionally, set market orders when you are trading mainstream crypto assets such as BTC or ETH. Setting market orders when trading less popular crypto assets could expose you to massive price changes or broad bid-ask spreads since they could take longer to execute.


Benefits and Disadvantages of Market Orders

While they have their benefits, market orders have their disadvantages. When you place a market order, you stand a higher chance of having your order executed fast. That said, market order trade execution time is not guaranteed.


When market liquidity drops, your market order could remain on hold as the market process orders as per its priority guidelines. This feature will expose your order to slippage and exchange fees. To offset these fees, use market orders when you are making voluminous trades. On top of this, use them when you are in a rush or when you are ready to pay more to execute an order.


How Crypto Social Trading Can Help You Trade Wisely

BingX is an advanced cryptocurrency trading exchange platform that has crypto derivatives and crypto social trading features. 


We invite you to try out our ‘copy trade’ function that allows you to copy order placements of veteran crypto traders. Our platform mirrors their trading strategies and, by doing so, enables you to trade just like a pro.


Recommended Articles:


Claim More New User Rewards

Claim Now