How to use market price and current price? Complete trading guide for limit orders and instant orders

In trading in the financial markets, investors often encounter two basic order types—market orders (immediate orders) and limit orders (pending orders). These two types of orders differ significantly in execution logic, risk characteristics, and applicable scenarios. This article will analyze the core differences between these two order types to help you make flexible choices based on market conditions.

Core Differences Between Market Orders and Limit Orders

A market order (immediate order) is an order executed at the current market price. When you choose a market order, the trade will be executed immediately at the real-time quote, without needing to set a specific transaction price yourself.

For example, if the current bid price for EUR/USD is 1.12365 and the ask price is 1.12345, a trader wanting to buy EUR/USD will execute at the current price of 1.12365. However, it’s important to note that market prices fluctuate rapidly; the price you see when placing the order may differ from the actual transaction price, a phenomenon known as “slippage.”

A limit order is an order to trade at a price specified by the trader. You need to set your target price, and the order will only be triggered when the market price reaches or surpasses your specified level.

Limit orders are divided into two types:

• Buy limit order: set a price, and when the current price falls to or below this level, buy
• Sell limit order: set a price, and when the current price rises to or above this level, sell

Using a relatable analogy, a market order is like shopping at a supermarket at the displayed price, while a limit order is like negotiating a price with a vendor at a market; you only buy or sell when the price meets your expectation.

Advantages and Disadvantages of the Two Order Types

The advantage of a market order is high execution certainty. When you need to enter a position quickly or want to stop-loss promptly, a market order ensures immediate execution. However, the downside is that the price is determined by the market; during high volatility, you may face unfavorable prices at the time of execution.

The advantage of a limit order is price control. You can wait for a more favorable price, often obtaining a better fill price, which can increase your trading profits. The downside is that there is no guarantee of execution—if the market never reaches your set price, your order remains unfilled indefinitely.

Recommended choices: Short-term traders or those who need rapid reactions should use market orders; long-term investors with clear target prices should use limit orders.

Practical Methods and Tips for Limit Order Trading

Key Elements for Setting Prices

Before using limit orders, first determine a reasonable target price. This price should be based on:

• Fundamental analysis of the asset
• Technical support/resistance levels
• Recent price volatility range

For example, if you believe a certain asset’s fair buy-in price is 50 units, you can place a buy limit order at 50. When the current price drops to this level, the order will automatically execute.

Applying Limit Orders in Range-Bound Markets

When the market fluctuates within a certain range, limit orders are most advantageous. Suppose an asset oscillates between 50 and 55 units; you can place buy orders at 50 or 51, and sell orders at 54 or 55, waiting for the price to bounce within the range to execute trades automatically. This can effectively reduce trading costs.

Limit Orders Suitable for Traders Who Cannot Watch the Market

If your trading plan is to buy at 50 and sell at 60, you can place two limit orders simultaneously and then close your trading software to attend to other matters. The market will execute trades according to your plan automatically. While this does not guarantee execution, it helps you strictly follow your trading discipline and is beneficial for stable long-term profits.

Practical Methods and Tips for Market Order Trading

How to Place a Market Order

Enter the trading page, select the “Market Order” or “Immediate Order” option, input the trading amount and leverage, then place the order immediately. The order will be executed at the current market price—either the bid or ask quote—immediately.

Note that the current price you see is static, but the market is dynamic. Therefore, the actual transaction price may differ from the price you saw when placing the order, and this difference is slippage.

Best Scenarios for Market Orders

Unidirectional trending markets are the most suitable for using market orders. When major positive or negative news is released, causing the asset price to skyrocket or surge, the market often moves strongly in one direction. In such cases, manually setting a price may be too slow; a market order can ensure quick entry and avoid missing the trend.

For example, if a significant news event causes an asset to jump 10%, hesitation could lead to regret. The advantage of a market order becomes evident here.

Identifying and Preventing Trading Risks

Main Risks of Limit Orders

The biggest risk of limit orders is failure to execute. If the price is set too extreme, the market may never reach that level, rendering the order useless. Therefore, set your target prices realistically and avoid greed.

Additionally, limit orders require patience. Some traders may not wait and instead frequently modify or cancel orders, which can disrupt their original trading plan.

Main Risks of Market Orders

Market orders are most prone to pitfalls in highly volatile markets. During sharp fluctuations, slippage can be significant; you might buy at a price far above your expectation or sell far below.

Furthermore, many traders tend to be driven by emotions during sudden market surges, blindly chasing gains or cutting losses with market orders. While this can allow quick entry, it also risks buying at a peak and then facing rapid reversals, turning into a bagholder.

Risk Prevention Tips

• When placing limit orders, base your target prices on technical and fundamental analysis, and avoid overly optimistic expectations
• Use market orders only when necessary; avoid developing a habit of chasing orders impulsively
• Combine with stop-loss and take-profit orders; risk management is essential regardless of order type
• Choose assets with sufficient liquidity to keep slippage manageable