Market order

The simplest of the order types, and the one whose condition is trivial: nothing has to be true before it becomes executable, so it goes to the market on receipt. It carries an instrument, a direction and a size, and it carries no price. What comes back is a fill, meaning the price actually dealt and the time it happened, which is not necessarily the price that was displayed when the instruction was sent.

The difference between the two is slippage, and it has two independent sources. The market can move while the message is in flight, in either direction, so slippage is not inherently adverse and a fill can come back better than the price shown. And the order can be larger than the quantity resting at the best price, in which case it consumes that level and continues into the next, which is a function of market depth rather than of latency.

The trade off against a limit order is exact and worth stating in one line: a market order fixes that the trade happens and leaves the price open, and a limit order fixes the price and leaves it open whether the trade happens at all. The circumstances that make a market order expensive are the same ones in which a limit order does not fill: a thin book, a gapping market, the seconds around a scheduled release. Some firms also apply a maximum deviation setting, which converts a market order into an instruction to deal only within a stated distance of the displayed price, and rejects it otherwise.