Navigating the stock market can be a tedious process if one is new to the field, has limited knowledge and/ or insufficient experience. Oftentimes traders and investors alike can enlist the services of a professional stockbroker to handle their investment portfolios as per their preferences.
Open a Demat account online such that you can apply the knowledge you glean from this article.
Understanding Market Order and Limit Order -
Investors can place orders with their stockbrokers to buy or sell a stock which can be executed in either one of the following ways.
1. Market Orders – These orders are placed “at the market” which are meant to be concluded with celerity at the prevailing market price of the stock.
2. Limit Orders – These orders are placed “at the limit” which means they indicate to the stockbroker the maximum or minimum price at which an investor would like their stock bought or sold.
Limit Order vs Market Order - Differences That Persist -
Market orders are governed by the speed with which they are carried out. Here, the price of the security is not the presiding factor. Conversely, limit orders are primarily governed by the price. In the event that the value of the security in question operates outside the specified outline mentioned in the limit order, the transaction does not transpire.
Limit orders are ideal for those seeking to trade securities that aren’t traded too often, have a higher level of volatility and/or have a wide bid-ask price. This refers to the gap that exists between what a buyer is willing to pay for a security and the lowest price a seller is willing to accept.
Market orders are more likely to occur in comparison to limit orders however there are no certainties owed to the fact that orders are based on the availability of the stock in question. The timing and size of the order also influence whether or not market orders are carried out or not.
Online Demat accounts allow for easy trading and can help provide you with practical knowledge on how to place market orders and limit orders. It is important to do due diligence prior to making any buy, sell or hold decisions pertaining to securities you might have your eye on. This preliminary research can reduce the potential of your incurring any risks and / or losses and can potentially allow you to accrue greater returns. Now that you have a better understanding of what the difference between a market order and a limit order is and how to buy and sell with them, you can look at market conditions, your financial goals and assess your risk tolerance prior to making use of said limit orders.