Market order refers to the immediate purchase or sale at the currently valid real-time priceCryptocurrency. Market orders are executed based on the limit orders that have been placed in the order book, which is what is called "taking" each limit order in the order book. This means traders cannot be 100% sure of the true transaction price. Slippage occurs when the actual price differs from expectations. The biggest advantage of a market order is that it can execute an entire order relatively quickly, simply and directly, especially when your requirements for slippage are not particularly high.

The difference between limit orders and market orders is, Limit orders allow users to set a price in advance and wait for orders to be placed on the order book. The exchange will only execute at the set price or better, we will expand on this part later.

What is the principle of market order?

There are two parties in the transaction: maker and taker. When you place a market order, you, as a taker, are accepting limit orders placed in advance by other placeholders.

As shown in the figure, in the Binance BTC-USDT spot market, the current price of BTC is 28,829.34 USDT. If you place a market order to buy 1 BTC, Binance will immediately match the buy market order to the lowest ask price on the order book, which is 28,829.34 USDT/BTC. In this case, if your cumulative purchase of market orders exceeds 3.8 BTC (as shown in the figure, the stock of pending orders at the same price is only 3.8 BTC), the Binance matching engine will automatically help you first buy all 3.8 BTC at that price. Eat it, and then the rest will be eaten layer by layer according to the closest lowest price on the order book, and so on, until all the market orders you placed have been eaten. Therefore, the average transaction price of your order may end up being much higher than 28,829.34 USDT.

The main advantages of market orders are : Simple, instant, efficient, and fully performs in most situations. However, its disadvantages are also obvious: first, there is slippage, that is, there may be a gap between the expected transaction price and the actual transaction price. The second is that traders must keep an eye on the market when executing buys and sells, and there is no way to execute them regularly.

When to use market orders?

If you value the execution of this order more than its transaction price, it is recommended to choose a market order at this time. For example, sometimes a Limit Order cannot be filled for a long time, but you may be anxious to complete the transaction as soon as possible so that you can get out of it. Market orders can come in handy.

However, if you want to buy some small currencies, it is not recommended to use market orders. Due to slippage, your purchase may cost more than expected. A limit order may be a better choice at this time. Note: When trading highly liquid assets with a small bid-ask spread on the order book, using a market order can get you a price close to or equal to the expected price. The wider the bid-ask spread, the higher the risk of slippage and rising costs.