Market Order Definition and Example
Market Order Definition – An order to buy or sell a stock at the current stock price.
Well, trading involves buying and selling of stock. People invests in the stock market to earn money and profits. Some individual invests on their own or some hire brokers to trade on behalf of them. Practically, most of the people hires brokers in order to keep their investment safe. A market order refers to ordering the broker or the brokerage house to sell or buy the specific stock at the current price.
In addition to this, if investor has not given any special recommendation to the broker, all the trading will be done at current market price of the stock. In case of market order, the brokerage charges are very low or minimal as brokers do not require to do much. They just require to execute the order at the current market price. Its advisable to avoid market orders on stocks which have low average daily volume because they have large spreads. It is also important to note that, if investor orders for market order, then the order is always executed.
Market Order Example
In order to understand market order meaning, let’s discuss an example.
You as an investor call your broker to buy 2 share of MRF. The broker will enter the trade as market order. Whenever someone is selling the share, the broker will purchase MRF share at the price which is currently trading in market and the trade will be closed.