The trading and exchange in cryptocurrency are more complex than only buying or selling. When you purchase or sell any financial capital like cryptocurrency, you will find many orders. From kill orders to stop orders, market orders are also among them; Here enters the question What Is Market Order In Crypto? it is the most simple and most often used type of order by newcomers.
Let’s have a detailed look at what is market order in crypto and how they work?
What Is Market Order In Crypto?
A market order is a kind of order that tells immediately to purchase or sell at the best available price. It needs the liquidity to be filled, which is effectuated based on the limit orders already situated on the order book. Thus, if you consider buying or selling immediately at the current market price, setting up a market order is your best option.
For buying, the market orders are matched against the best available ask on the order book, whereas, for selling, market orders are matched against the best available offer.
For example, the price of BNB crypto is rising rapidly, so you want to buy it as soon as possible. If you are willing to take the market price as you can buy BNB instantly, then, in this case, you will make a market order on your selected exchange.
How Does Market Order Function?
Unlike limit orders, market orders are implemented immediately at the recent market price. There will always be two sides in the trade- one, the market, and the second, the buyer.
So, when you set down a market order, you accept the price set by someone else.
For instance, trading will match a buy market order to the minimum ask price on the order book. In contrast, a sell market order will be compared with the top bid price on the order book.
As mentioned earlier, a market order requires an exchange to have cash flow on the order book to meet the current demand. If a market order eliminates liquidity from the trade, you will have to pay maximum fees as a market taker if you place one.
It is straightforward to understand the relationship between market makers and market takers with the help of numbers. So to understand this, let’s view an example-
Consider that you want to buy one BNB, and the present market price is around $370. Now, you head to the trading platform and select the BNB/BUSD pair. You enter one in the amount field and click buy to generate your purchase market order.
After placing your order, the exchange will look in the order book. The ledger will contain limited orders with a specific quantity and price to purchase or sell capital.
In this case, your market order to buy one BNB at the market price will be matched with the minimum sell limit order on the order book. And if the lowest limit order in the order book is 1.286 BNB at $371.40. Then your purchase market order will buy one BNB on 1.286 offer giving you a position price of $371.40.
But, imagine you want to buy 500BNB at the present market price. The low-priced sell-like order available will not have the volume to fill your whole market buy order. So, your market remaining volume will be intuitively matched with the next best sell limit order, finding its way up to the order book until it’s filled. This process is termed slippage, which explains why you pay higher prices or receive lower as a market taker.
Further, if you are interested click here to know about What Is Limit Order In Crypto?
How To Place A Market Order?
For placing the market order, follow the below-given steps-
- Select the market option under the order form section of the trade view.
- Select buy or sell and enter the amount of your order. You can set the amount in any supported currency.
For example- if you select 25%, this amount will be deducted from your fiat account balance to fill in the crypto amount.
- Confirm your order
However, keep in mind that market orders can not be canceled because they get filled immediately.
Market orders can also be filled partially at several prices, and each part of your order will be shown in the order book panels.