What a market order is

What the instruction actually contains 

A market order ticket has four fields that matter, and only three of them are filled in by the person sending it. The instrument is chosen. The direction is chosen. The size is chosen. The price field is absent, greyed out, or showing a number that cannot be edited, because a market order carries no price at all. What it carries instead is a standing instruction about price: deal at the best price available when this order arrives, whatever that turns out to be.

The distinction is easy to forget, because a ticket displays a price while it is being filled in, and a displayed price looks like an offer. It is not one. A quote is a snapshot of where the market stood when the last update was published, and it describes the past exactly as every printed price does. The order is dealt against the market that exists when it arrives, which is a different market, if only by a fraction of a second.

What happens between the click and the fill 

The instruction is a message, and a message travels. The sequence below is the same on every platform and for every instrument, and nothing in it is unusual or hidden.

1. The order leaves the terminal as a message stating the instrument, the direction and the size, and nothing else.
2. It reaches the broker's system, where it is checked: whether the instrument is tradable at that moment, whether the size sits within the limits published for it, and whether the account can support the position.
3. It is priced against the liquidity actually available at that instant, which may be a single price for the whole order or several prices for parts of it.
4. A fill comes back, stating the price, or the prices, at which the order was dealt.
5. The position is recorded at the price dealt, and the ticket updates to show it.

Every step takes time. The total is short enough to be measured in fractions of a second and long enough that a price can change inside it. That is not a fault in the arrangement. It is the ordinary consequence of two events at two moments: the price was read at one, and the order was dealt at another.

Why the fill price can differ from the screen 

Two independent things produce a difference between the price displayed and the price dealt, and they are worth separating, because they widen for different reasons.

The first is time. During the interval described above the market carries on updating, and where it has moved, the order is dealt against the level that exists on arrival rather than the one on the screen when it was sent. The second is size against depth. A quoted price is available for a quantity, not for any quantity, so an order larger than the quantity resting at the best price is dealt in parts, at that price and then at the next one behind it, and the average price of the whole order sits away from the price displayed. That second reason is not the market moving. It is the order being bigger than the price.

The difference has a name, slippage, and ordinary usage makes the name sound one sided. It is not. The mechanism runs in both directions with no preference: where the price at the instant of dealing is better than the one displayed, the fill is better, which is conventionally called price improvement, and where it is worse, the fill is worse by the identical mechanism. Neither outcome is a decision taken by anybody. Both are the one fact, that an order carrying no price is dealt against whatever market exists when it lands.

When the difference widens 

The interval is always there. What changes is how far a price can travel inside it, and how much quantity sits at each level while it does. Both are conditions of the market rather than settings on a ticket, and they are predictable in kind even though the size never is.

• Scheduled announcements. Prices travel furthest around a data release, a central bank decision or a results announcement for a shares contract, and the quantity quoted at each level often thins out beforehand, so the two effects arrive together.
• The reopen. The first prices after a weekend, a public holiday or a trading halt are formed with fewer participants and can sit a long way from the last price printed before the pause.
• Hours when the instrument's main market is closed. Fewer firms quote, the quantity available at each level is smaller, and the same order reaches further down the available prices than it would at a busier hour.
• Order size relative to what is quoted. An order small enough to be dealt at the best price in a busy hour is not necessarily small enough to be dealt at the best price in a thin one.
• The instrument itself. A heavily traded currency pair and a thinly traded single share are quoted by different numbers of participants in different quantities, so a difference that is unusual on the first is ordinary on the second.

The reopen case has its own name, gapping, and it is the one condition where the difference has no upper bound in principle. When a market has been closed there is no continuous sequence of prices between the last level printed before the close and the first printed after it. The intervening levels never traded. An order dealt at the reopen is dealt at the new level, not at any of the levels the price appears to have passed through on a chart.

Where it sits on the ticket 

Trading at YAL is on MetaTrader 5, and on both of them the market order is the default state of the ticket. The type selector is what distinguishes it: one setting deals now, and the others hold the instruction until a stated price is reached, which is the subject of the lessons that follow this one. Where the selector is left alone, the ticket sends a market order.

The MetaTrader ticket also exposes the execution mode published for the instrument itself, and the field that belongs with it: a maximum deviation, stated in points. Points rather than pips, and the earlier lesson in this module explains why that matters: on a display printing the fractional digit the two counts differ by a factor of ten, so a tolerance entered in the wrong unit is a tenth or ten times the intended distance.

Where practitioners disagree 

The disagreement about market orders is not about how they work, which is settled, but about what the omitted price is worth. One tradition treats certainty of dealing as the thing being bought: the order is filled, the position exists, and the difference between the displayed price and the dealt price is what that certainty costs. The tradition arguing the other way observes that the cost is unknown when the order is sent and unbounded at a reopen, so a cost accepted in advance without a figure has not obviously been assessed at all. Both are accurate about different conditions, which is why the argument persists rather than resolving.

The second disagreement concerns the tolerance settings above. One school treats a tolerance as straightforwardly worth setting, on the grounds that it bounds the worst case a fill can produce. Another observes that a rejected order in a fast market leaves an intended position simply absent, which converts a question about price into a question about whether a position exists at all. Neither position is settled by evidence covering every instrument and every hour, and neither is put forward by this page as the one that works.