▶ Market Order

1. Market order definition

A market order is an order to immediately buy or sell at the best available price. This of course needs sufficient liquidity to be filled, meaning that it is executed based on the limit orders already placed on the order book. If you want to buy or sell instantly at the current market price, setting a market order is your best option. For example, the price of WOO might be rising rapidly, and you want to buy it ASAP. You're willing to take the market's price so long as you can purchase WOO instantly. In this case, you'd make a market order on your chosen exchange.

2. How does a market order work?

Unlike limit orders which are placed on the order book, market orders are executed instantly at the current market price. There are always two sides to trade; the maker and the taker. When you place a market order, you are taking the price set by someone else. For example, an exchange will match a purchase market order to the lowest ask price on the order book. In contrast, a sell market order will be matched with the highest bid price on the order book.

As mentioned, market orders require an exchange to have liquidity on the order book to meet the instant demand. WOO X's fee schedule demonstrates the difference clearly between maker and taker fees.

3. How to place a market order on WOO X?

It's much simpler to see the relationship between a market maker and taker with the numbers, so let’s see an example. Imagine you want to buy 1000 WOO, and the current market price is around $176 (US dollars). You head to WOO X and open the WOO/USDT pair. To create your buy market order, you enter 1000 in the amount field and click [Buy / Long].

After placing your order, the exchange looks at the order book. This ledger contains limit orders with a specific quantity and specified price to purchase or sell an asset. In this case, your market order to purchase 1000 WOO at the market price (also known as the spot price) will be matched with the lowest sell limit order on the order book.

As you can see, the lowest order on the book is for 65,432 WOO at $0.177 (USDT). Your purchase market order will buy 1000 WOO from the 65,432 WOO on offer, giving you a cost of $177.

But let's say you want to buy 500,000 WOO at the current market price. The cheapest sell limit order available doesn't have the volume to fill your entire market buy order. Your market order's remaining volume will be automatically matched up to below ask*10% or above bid*1000%.

4. Market order vs. limit order

To briefly recap, limit orders are orders to buy or sell a quantity of a financial asset at a set price or better. You can also choose whether the exchange can partially fill your limit order or if it must be filled. In the latter case, if the exchange can't fill your order, it won't execute it at all.

Market orders can only be filled with existing limit orders. Not everyone wants to take the price available on the market when trading or investing, so a limit order is a good alternative. You can use limit orders to plan out your trades in advance without needing to be at your desk trading.

Apart from these basic differences, market orders and limit orders are suitable for a variety of trading activities and purposes. Limit orders are usually better used:

• When the asset price has high volatility. Placing a market order in a very volatile market can yield unexpected results. The price may change from the moment the order is created to its execution. These slight differences can be the difference between profit and loss for arbitrageurs. A limit order will ensure you get the desired price if not better.
• When the asset has low liquidity. In this case, the use of a market order may cause slippage. This happens when there are a small number of market makers and your order cannot easily be filled around the current market price. You will then receive a lower average selling price or a higher average purchase price than you expect. On the other hand, a limit order will not be filled if the slippage exceeds your limit.
• If you already have a strategy. Limit orders do not require any interaction on your part to start filling and can be placed in advance. This means that your strategies can still be deployed even if you are not physically at your device. You cannot do the same with market orders.

5. When should you use it?

Market orders are handy when getting your order filled is more important than getting a certain price.
When you are trading with a highly liquid token, using a market order may be more practical, WOO X is specialized in deep liquidity.