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

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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.

Do let me know in the comment section in case of any doubt.

jeff jeffy answered 1 year ago

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