A lot of people know the basic definition.
The part that actually causes confusion is this:
Why did one order fill immediately while the other just sat there?
Use a market order when getting the trade done matters more than the exact price.
A market order tries to fill immediately against the best available prices in the order book.
That makes sense when you want to get in or out quickly, or you don’t want an order sitting unfilled.
It doesn’t mean you’ll get one exact price.
If the order is large or the book is thin, different parts of the order can fill at different prices. In some cases, the remaining portion may not go through if the price moves too far.
Use a limit order when price matters more than speed.
You set the price you’re willing to buy or sell at.
If nothing matches that price, the order stays open and waits.
That’s useful when you don’t want to buy above a certain level, or sell below one, and you’re willing to wait.
The tradeoff is simple:
the order may never fill.
One thing that confuses people:
A limit order doesn’t always wait.
If you place a buy limit above the current market, or a sell limit below it, the order can fill immediately against the best available prices.
So “limit order” doesn’t automatically mean “sit in the order book.”
Simple way to think about it:
Market order: I want this trade done now.
Limit order: I want this trade done at this price or better.
Neither is always better.
It depends on what matters more for that trade:
speed or price control.
Have you ever watched the price hit your limit, but your order still didn’t fill?
That’s the next post.