Every trade starts with a decision most beginners barely think about: how to place the order. The two most common choices are a market order and a limit order. One prioritises getting the trade done, the other prioritises the price. Picking the wrong one will not usually ruin you, but over time it can quietly cost you money, especially in fast or thinly traded markets.
What a market order does
A market order tells your broker to buy or sell immediately at the best price currently available. In a busy market such as a major currency pair or a large FTSE 100 share during London hours, that price is usually very close to what you see on screen.
The benefit is certainty that you will be filled. The cost is that you do not control the exact price. If the market is moving quickly or there are few buyers and sellers, you may be filled at a worse price than expected. That difference is called slippage.
What a limit order does
A limit order tells your broker to buy only at a set price or lower, or to sell only at a set price or higher. If you want to buy a share trading at 205p but think 200p is fair, you can place a limit order at 200p. It will only fill if the price comes down to that level.
The benefit is price control. The cost is that the trade may never happen. If the share rises from 205p and never returns to 200p, you miss it entirely.
Why the spread matters
Every market has a buying price and a selling price, and the gap between them is the spread. A market order to buy pays the higher price, and a market order to sell receives the lower one. In liquid markets the spread is small. In smaller shares, outside main trading hours or around big news, it can widen sharply. Limit orders let you avoid paying a wide spread by naming your own price.
When each one makes sense
Market orders suit situations where getting in or out matters more than a small difference in price. That might be closing a losing position quickly or trading a very liquid market in normal conditions.
Limit orders suit situations where price matters more than speed. That includes entering a position at a level you have planned in advance, trading less liquid shares, or avoiding the first chaotic minutes after the market opens. Our guide to the order book shows how limit orders build up the depth of a market.
Common beginner mistakes
The first is using market orders at the open or around big data releases, when prices can jump and spreads widen. The second is setting limit orders so far from the market that they never fill, which can turn a good idea into a missed trade. The third is forgetting about open limit orders, which can fill days later when conditions have changed. Always check what orders you have working.
The beginner takeaway
The choice comes down to a simple question: is it more important to get the trade done, or to get the right price? Answer that before you click, and you will make better decisions. Our explainer on stop-limit orders covers the next step up. For what is moving markets today, this morning’s Morning Market Brief has the picture. If you want to understand your own trading habits more clearly, the free Samuel & Co Trading Trader Assessment is a sensible next step.
