Why do market orders carry execution risks?
Market orders execute at the best available price but may result in unfavourable execution due to:
Price fluctuations – Rapid market movements can lead to unexpected execution prices.
Low liquidity – If an asset has low trading volume, the order may fill across multiple price levels, causing slippage.
Bid-ask spread – A wide gap between buy and sell prices can result in higher-than-expected costs.
To reduce these risks:
Use limit orders to control execution prices.
Avoid market orders during high volatility periods (e.g., market opening/closing, news events).
Check the bid-ask spread before placing an order.
Related Articles
What are After Market Orders (AMO) / Schedule Order?
After Market Orders (AMO) a.k.a Schedule Orders allow investors and traders to submit orders outside the regular trading hours. Once placed, these orders are scheduled for execution on the subsequent trading day, adhering to the specified order type ...
Do After Market Orders have to be limit orders (AMO)?
No! After market orders need not be limit orders. You can place 'Market' Orders in AMO.
Are there inherent risks when investing in mutual funds?
Yes, like all investment vehicles, mutual funds carry risks. They invest in a variety of financial securities such as equities, bonds, and money market instruments. The performance of these securities can be volatile, leading to fluctuations in the ...
If the market hits a circuit breaker, what happens to my existing orders & positions?
In simple words, a circuit breaker is a limit imposed on stocks or index to trade within the defined range. If this range is violated then that stock or index (In case of Index, trading will be halted on both indices) will come under circuit breaker ...
Can I place market orders for commodity options on FYERS?
At FYERS, placing market orders in the MCX Options segment isn't feasible. Given that commodity derivatives, especially Options, witness low trading volumes in India, many of these options contracts are illiquid. Permitting market orders can ...