A market order buys or sells a share immediately at the best available price. A limit order buys or sells only at a price you set or better. The choice is a trade-off between certainty of execution and control over price.
What market and limit orders are
With a market order, you say: "Buy (or sell) now, at whatever the current price is." It executes almost instantly in a liquid share, but the exact price is not guaranteed. With a limit order, you say: "Buy only at ₹500 or lower" or "Sell only at ₹520 or higher." Your price is protected, but the order may not execute if the market never reaches it.
How it works in India
Indian brokers let you choose the order type when placing a trade. Orders also have a validity: a DAY order stays active until the end of the session; an IOC (immediate or cancel) order executes whatever is possible immediately and cancels the rest. Orders placed outside market hours can be submitted as after-market orders (AMO), sent to the exchange when the next session opens. Many brokers add market protection settings that limit how far a market order can execute from the last price.
A simple example
A share's best buy price is ₹499.50 and best sell price is ₹500. You place a market order to buy 100 shares and get them at ₹500, or slightly higher if there were not enough shares at ₹500. Instead, you place a limit order at ₹495. If sellers bring the price down to ₹495 during the day, your order executes; if not, it remains unfilled and expires at the end of the day.
Slippage and liquidity
In heavily traded shares, the gap between buy and sell prices, the spread, is tiny, so market orders execute close to the displayed price. In thinly traded shares, the spread can be wide and the order book shallow, so a market order may fill at a much worse price than expected. This difference is called slippage. Limit orders are especially important for small, illiquid shares.
Which to use when
Market orders suit liquid shares when getting the trade done matters more than a small price difference. Limit orders suit situations where price matters: illiquid shares, volatile moments such as just after the open, large orders, or when you are happy to wait for a specific price.
Why it matters for investors
Choosing the right order type helps you avoid paying too much, control your entry and exit prices, and avoid surprises in fast or thin markets.
Orders at the open and close
Prices can be volatile in the first minutes after the market opens and around important announcements. Placing market orders at these times increases the risk of slippage. Many investors prefer limit orders during these periods, or wait for prices to settle. Orders placed during the pre-open session are matched at the single opening price calculated by the exchange.
Common misconceptions
"Market orders always fill at the last traded price." They fill at the best available prices, which can differ.
"Limit orders always execute." They execute only if the market reaches your price.
"Order type doesn't matter for small trades." In illiquid shares, even small market orders can slip.
Frequently asked questions
What is a spread?
The gap between the best buy and best sell prices.
What is slippage?
The difference between the expected and actual execution price.
What is an IOC order?
An order that executes immediately as far as possible and cancels the remainder.
What is an AMO?
An after-market order, queued for the next session.
How to use this on PositoAI
PositoAI notes on company pages when a stock has not traded recently, a sign of low liquidity where limit orders are especially important. Research the company first, then place your order with your broker.
Summary
A market order executes immediately at the best available price; a limit order executes only at your price or better. Market orders give certainty of execution, limit orders give price control. In India, orders can be DAY, IOC or AMO. In illiquid shares, use limit orders to avoid slippage.