3 Key Differences Between Limit Order and Market Order
The terms limit order and market order are well known across traders. To sell or buy an asset whether it is in a crypto or a commodity market, they will need to execute a limit or market order.
- Limit Order is when a trader buys or sells a digital asset at a pre-specified price. This order consists of a maker or taker depending on whether it crosses the order book.
- Market Order will buy or sell at the best average market price and all market orders as taker.
How do you know which one to use in an exchange? Whether you are in the crypto market or a commodity market, here are 3 key differences between Limit Order and Market Order:
1. PRICE OPTION
Limit order allows you to customize the specific price you want to buy or sell an asset. In a market order, you are only allowed to buy or sell an asset at the best average market price.
In the forms, you can see that there are less inputs in the Market Order than the Limit Order.
2. TRADE EXECUTION TIME
Since limit order is based on a specified price to buy or sell, the order won’t be executed immediately. It will only be executed when the price has reached the desired amount. Whereas market orders will be executed instantly.
3. FEES REQUIREMENT
When executing a limit and market order, the trader will also have to pay or given fees.
For a limit order, traders will be given a maker fee. Maker fee is a type of fee that is paid when traders add liquidity to the order book by placing a limit order that is below the buying price and above the selling price. If a trader places a limit order that matches a hidden order, the trader will pay the maker fee.
For a market order, traders will be charged for a taker fee. Taker Fee is a type of fee that is paid when traders remove liquidity from the order book by placing any order that is executed against an order on the order book.