Briefly discuss the difference between the following pair: Limit order and at market order

Expert Solution

A limit order is an order to buy a security at a specific price or lower. A limit order to sell is an order to sell a security at a specific price or higher. When a limit order is placed, it is not necessary that it will be executed even if the stocks have good liquidity.

A market order is an order to buy a security or sell a security at a price that other buyers and sellers are ready to buy or sell for. When a market order is place, it will be executed given that there are buyers if you are selling and there are sellers if you are buying. In a market order you are not sure about the rate at which you will be able to buy or sell.

If an investor is looking to make a specific amount of profit he or she should place a limit order on the stock. If the investor is looking for liquidity and want to buy or sell immediately, should go for a market order. A limit order is more secure than a market order as you know at which price you will be able to buy or sell.

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jeff jeffy answered 1 year ago

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