When an investor places an order with a broker to buy or sell a security, he has several alternatives that can influence the overall costs of the transaction and the price the investor pays or receives for the security.
Different types of orders make a difference in whether the trade gets executed and at what price. A market order is an order placed with a broker at the market and requires an immediate trade at the best available price. Unless the investor specifies otherwise, the broker will execute the order as a market order.
The market order has the advantage that it is almost always guaranteed that the order gets executed, whereas the market order has the disadvantage that in fast-moving markets the investor may not pay or receive the price he obtained from a realtime quote or from the broker’s quote.
Price quotes are only for a specific number of securities and by the time the broker executes the trade, the price of the security could be different. For a large order (i.e., number of shares), the investor receives different prices for parts of the order.
The market order is considered as the simplest type of order; however, there are many other types of orders: limit orders, stop orders (or stop-loss orders), stop-limit orders, and market-if-touched orders (or MIT order or board order).