What is a Market Order?

If you're new to the stock market, the terms can sound confusing. But here we will make sure to make you understand the term “Market Order”. Imagine you're at a local sabzi mandi, and you want to buy tomatoes, but you don’t bargain. You just tell the vendor, “Give me 1 kilo of tomatoes.” He gives you the tomatoes at the current price, which is ₹40 kg. That’s a market order.

What is a Market Order?

A Market Order is the most straightforward way to buy or sell a stock. It means buy or sell this share immediately, at the best price available right now in the market.

For example, let’s say you want to buy 5 shares of Reliance Industries (RIL).  

• Current Market Price: ₹1400 per share (approx).  
• You place a market order.  
• Your broker will immediately buy 5 shares at ₹1,400 or the next best available price.  You don’t care if it's ₹1,400 or ₹1,402. 

You just want the order to go through immediately.

Let’s take a real-life example, suppose there's news that Tata Motors is launching a new electric vehicle next week. The stock is likely to go up. Today, the price is ₹709 (approx).  You fear the price will rise rapidly. So you place a market order for 10 shares.  

Result: You might get the shares at ₹709 or ₹710, but you’ll get them immediately.  If you tried to wait for a cheaper price, you might miss the rally.

Types of Market Orders

Here are the types:

Buy Market Order

The broker executes the order instantly at the current market price, which simply means buy this stock right now at the best available price.  

For example, 

• You place a buy market order for 10 shares of HDFC Bank.  
• Current price: ₹1,940 (approx).  
• You get 10 shares at ₹1,940 (approx) or the next best available price.

Sell Market Order

The order gets completed right away, which simply means sell my shares right now, whatever price the market gives.  

For example,

• You hold 5 shares of Infosys.  
• You place a sell market order.  
• Current price is ₹1,550 (approx), your shares are sold at ₹1,550 (approx) or slightly below if that’s what buyers are offering.

Intraday Market Order

If you forget to sell before 3:15 PM, your broker may auto square-off the position, which simply means used for same-day trading, buy and sell on the same day.

For example, 

• You place an intraday buy market order for Tata Steel in the morning.  
• You must sell it before the market closes, or else the system will do it for you.

Delivery Market Order

You buy shares with the plan to keep them in your Demat account, which simply means you use it when you want to hold the stock for more than one day.

For example, 

• You buy 20 shares of ITC at the market price for delivery.  
• They will be credited to your Demat within T+1 day (1 trading day after the purchase, as per new SEBI rules).

Stop Market Order (Stop-loss Market)

When that price is hit, a market order is placed automatically, which simply means you define a trigger price.  For example,

• You buy shares of Axis Bank at ₹1,170 (approx).  
• You want to limit the loss to ₹1,100.  
• You place a Stop Market Order at ₹1,100. 
• If Axis Bank drops to ₹1,100, your shares are sold at the market price to prevent further loss.

How Does a Market Order Work? 

Let’s understand how the market order works with the example, assuming you want to buy 5 shares of Infosys. Here's what happens: 

You place the order:

• You go on Zerodha, Upstox, or Groww.  
• You choose “Buy”, select Market Order, and enter quantity = 5.  

Order sent to the exchange:

• Your broker sends the order to the stock exchange (like NSE or BSE).  

Exchange finds the best match:

• The exchange looks at the order book, a list of current sellers and their prices.
• It picks the lowest available selling price to match your buy order. 

The Order is executed:

• Your order is filled instantly, usually in fractions of a second.  
• You get the shares at the price that was available at that moment.  

Confirmation:

• Your broker shows you a confirmation: “Bought 5 shares of Infosys at ₹1,550 each.”  
• These shares are added to your Demat account (for delivery trades) or appear in your positions (for intraday). 

For example, Buy Market Order in Action:

Action	Outcome
You place a buy market order	App sends it to NSE
Best available ask price	₹1,550
Your order matches the seller	You buy at ₹1,550 immediately
You didn’t choose the price	You just wanted the trade to go through instantly

If multiple prices are available (e.g. ₹1,550, ₹1,552), your order might get split across them, especially for large quantities.

Advantages of Market Order

Here are the advantages:

Instant Execution: 

• Your order is completed immediately at the best available price.
• For example, if you buy 10 shares of TCS, you get them within seconds.

Beginner-Friendly: 

• No need to worry about setting prices or understanding charts.
• For example, just click "Buy" or "Sell", no complications

Great for High Volume Stocks: 

• Works best with liquid stocks like Reliance, Infosys, and HDFC Bank.
• For example, you get fair prices and fast execution

Quick Exit in Panic Situations: 

• Useful when you want to exit a trade fast during market crashes.
• For example, the Market crashes 5%, and you sell your holdings immediately to avoid further loss.

Time-Saving: 

• No need to wait for a certain price to be hit.
• For example, you don’t monitor the market all day.  

Disadvantages of Market Order

Here are the disadvantages:

No Price Control: 

• You don’t choose what price you’re buying or selling at.
• For example, you click “Buy,” expecting ₹900, but the stock gets executed at ₹910.

Slippage Risk: 

• The final executed price may be higher/ lower than expected, especially in volatile stocks.
• For example, a stock jumps ₹10 between the moment you click and order execution. 

Not for Illiquid Stocks:

• In stocks with low volume, prices can vary widely between buyers and sellers.
• For example, you want to buy a penny stock, but no sellers at a fair price, you overpay. 

Can Miss Strategy Targets:

• You can't use market orders if you're targeting a specific price.
• For example, you want to buy HDFC only if it drops to ₹1,900, a market order won't help.

Risky in Volatile Times:

• During earnings or news events, prices fluctuate quickly, and market orders can go wrong.
• For example, on Budget Day, you place a market order, and the stock moves ₹20 instantly.

Conclusion

In conclusion, if you're a beginner in the Indian stock market, market orders are your friend, but like all friends, know when to rely on them.  Ola Auto, you press “book now”, and the nearest auto is assigned. You don’t know if the driver is 3 minutes away or 6, but you’re on your way fast. Use market orders wisely, and pair them with limit orders as you get more experienced. We hope this blog has been helpful to you.