Understanding Market Orders
Market Order vs. Limit Order
Market orders and limit orders are two common types of trading instructions that differ in their execution methods and price settings.
A limit order is executed within a price range specified by the investor, while a market order is executed at the current market price. Market orders have the advantage of quick execution, but there may be price discrepancies in highly volatile markets. Limit orders, on the other hand, provide more precise control over the trading price but do not guarantee immediate execution.
When to Use a Market Order?
It typically depends on the trader's goals and market conditions:
Quick Execution: A market is an ideal choice when an investor wishes to trade immediately and ensure the transaction is completed.
High Liquidity Markets: Market orders are more likely to be executed at favorable prices in markets with high liquidity.
Short-Term Trading: Market orders provide a valuable advantage for short-term traders seeking swift market entry and exit.
Why are market orders sometimes rejected with a message indicating restricted trading or large fluctuation, and requiring me to switch to limit orders?
Since there is no transaction price guarantee for market orders, the trading platform imposes restrictions to protect the safety of investors when stock liquidity is abnormal (such as triggering the volatility control mechanism or trading halts), or when volatility is excessive due to uncertain reasons. The standards for abnormal liquidity and excessive volatility will be adjusted based on internal risk control principles. Customers can switch to limit orders to continue placing orders.
Risks Associated with Market Orders
Price Discrepancies: In highly volatile markets, market orders may be executed at prices that differ from the expected price, leading to higher transaction costs.
Lack of Price Control: Without a set price cap or floor, investors cannot control the specific execution price of their trade.
Unsuitable for Low Liquidity Markets: In markets with low liquidity, market orders may face issues such as lack of counterparties or significant price fluctuations. Furthermore, executing cetain assets with poor liquidity may expose traders to "spoofing" orders—wherer orders are placed at extreme buy or sell prices—resulting in market orders being filled at unfavorable prices due to inadequent liquidity.
Market order risks: You may buy at higher-than-expected prices or sell at lower-than-expected prices, even at extreme prices. To control the price range, please always use limit orders with specified prices.
Please closely monitor your order status and execution information: When placing a market order, be aware that during times of severe price fluctuations, lack of liquidity, or temporary absence of buy/sell orders, the transaction price may exceed expectations, or the order may not be executed and could be canceled.
Disclaimer
Market order is a convenient online trading method provided by Long Bridge for customers. Long Bridge provides stable services as much as possible, but it cannot guarantee its absolute reliability. If the market order is not executed due to network interruption, server abnormality and other physical factors, Long Bridge will not be liable for any loss or damage caused thereby.