Market order is a term commonly used in finance and trading, referring to a request made by a customer to buy or sell a stock or other financial instrument at the current market price. The spelling of this term can be explained with IPA phonetic transcription as /ˈmɑːrkɪt ɔːdər/, with stress on the first syllable of "market" and the second syllable of "order." The "ar" sound in "market" is pronounced with an open-mid back rounded vowel, while the "or" sound in "order" is pronounced with an open-mid back unrounded vowel.
A market order is a type of financial order typically executed at the prevailing market price. It is an instruction from an investor to a broker or a brokerage firm to buy or sell a specified quantity of a security or financial instrument immediately at the best available current price. The execution of market orders is done swiftly and with high priority, as they prioritize prompt execution over the price at which the order is executed.
Unlike limit orders that specify a maximum or minimum price at which the order should be executed, a market order guarantees execution but not the exact price at which the trade will be executed. The execution price of a market order is determined by the ongoing trading activity in the market. As such, the actual executed price may differ slightly from the last quoted price at the time the order is submitted.
Market orders are commonly used by individual investors who seek a quick and immediate execution of their trades. They are particularly useful when the investor is more concerned with the speed of execution rather than the exact price at which the trade takes place. Market orders are frequently used in highly liquid markets where there is ample trading activity, as it reduces the risk of the order being unfilled or delayed. However, in situations of high market volatility or low liquidity, market orders may result in the execution of the trade at a significantly different price than anticipated by the investor.
The word "market" originated from the Latin word "mercatus", which means "trading" or "buying and selling". The term "order" comes from the Old English word "ordre" or "ordrian", which means "to set in order" or "to arrange".
Therefore, the etymology of "market order" suggests that it refers to an instruction or command given to a broker or exchange to execute a trade immediately at the best available price in the market.