If you are an Australian trader, you have access to a range of market orders that can help you complete your trades quickly and efficiently. Read this article to get a glimpse of the types of stocks available for trading locally, and we will look at the different types of market orders available in Australia, discussing the benefits of market orders.
What is a market order?
A market order is an order to purchase or sell a security at the current market price. Market orders are placed with a broker and are subject to the broker’s commission. When you place a market order, you agree to pay the asking price if you buy or the bid price if you are selling. The asking price is the lowest price that a seller is willing to accept for security. The bid price is the top price that a buyer is prepared to pay for a security.
Market orders are usually filled within a few seconds but may take longer if there is low liquidity in the market.
Placing a market order
Australian stock traders can place a market order by contacting their broker and giving them specific instructions. The broker will then execute the Australian Securities Exchange (ASX) trade at the best available price. Market orders are typically used when the trader wants to buy or sell any shares and are willing to accept any available price.
However, it’s important to note that market orders are not guaranteed to be executed at the desired price, as the market may move against the trader while the order is being filled. For this reason, traders should only use market orders if they’re comfortable with accepting any price.
The benefits of using market orders
Australian stock traders typically can use either market orders or limit orders when they buy or sell shares. Market orders are carried out at the current market price. In contrast, limit orders allow traders to set a maximum price they are willing to pay (for a purchase order) or a minimum price they are willing to accept (for a sell order).
There are pros and cons in applying each type of order, and the best choice for a particular trade will depend on the circumstances. One advantage of market orders is that traders can execute them very quickly. If time is vital, a market order is likely the best option.
Another advantage is that market orders provide certainty. Once the order is placed, it will be filled at the prevailing market price, regardless of how much the price may move. It can be desirable when trading volatile stocks prone to sudden price swings.
The risks associated with market orders
Australian stock traders should be aware of the risks associated with market orders. The main risk associated with market orders is that the security price may move unexpectedly, resulting in a loss. This order is often used by traders who understand the market well and are comfortable taking risks. However, it is advisable to use limited orders for traders who are new to the market or who are not comfortable with taking risks.
Limit orders allow traders to set a maximum price they are willing to pay or the lowest price they are willing to sell at, which helps to minimise losses.
Tips for choosing the correct market order for your needs
Australian stock traders have a few different options for market orders, and these tips might help you consider the correct market order for your needs.
- If you want to buy or sell any shares, it’s best to use a limit order, and it will ensure that your order is filled at the price you want.
- If you’re looking to quickly get in or out of a trade, a market order is your best bet. Traders will fill your order at the best available price.
- If you want to set a price that you’re willing to buy or sell, you can use a stop-loss order. Day traders often use this type of order.