Illiquid stocks can be risky to trade due to low volumes and wide bid-ask spreads. Placing market orders in such stocks may result in execution at unfavorable prices. To avoid this, FYERS strongly recommends using limit orders.
Why limit orders are safer for illiquid stocks
In illiquid stocks, there’s often a significant gap between the last traded price (LTP), the bid price (buyer), and the ask price (seller). A market order will try to execute immediately at the best available price, which may be far from the LTP, leading to:
- Slippage (buying/selling at a worse-than-expected price)
- Freak trades
- Sudden jumps in execution price
A limit order, on the other hand, gives you control over the maximum price you're willing to pay (for buy orders) or the minimum price you're willing to accept (for sell orders). The order will execute only if the market matches your price.
How to place a limit order
You can follow the step-by-step guide on placing a limit order on FYERS Web or Mobile here: How to place a Limit Order in FYERS
What If...
| Scenario | Explanation |
|---|
| I place a market order in an illiquid stock | The order may execute at an extreme price due to lack of opposing bids or offers. |
| My limit order doesn’t get executed | This means the market hasn’t reached your limit price. You can modify or cancel the order anytime. |
| I want to reduce slippage | Always use limit orders for illiquid or low-volume scrips to avoid price shocks. |
A good practice is to check the bid-ask spread and volume before placing any order in a stock with low liquidity.
Last updated: 28 Jun 2025
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