Do not hit Buy too quickly
The price displayed in an app, such as $100.00, is not always the price you can actually get. It may be the last traded price, bid, ask, midpoint, or a platform display price. Your real cost depends on what buyers and sellers are willing to do in the order book at that moment.
FINRA’s explanation of market and limit orders is a good starting point: a market order prioritizes execution, not price certainty; a limit order sets a price boundary, but may not execute.
Simple example
| Displayed price | Bid | Ask | A market buy may fill near |
|---|---|---|---|
| 100.00 | 99.80 | 100.20 | 100.20 or higher |
If the ask only has 20 shares available and you buy 100 shares, the remaining shares may execute at higher prices. You thought you bought at 100.00, but your average fill may be 100.35. That gap is one form of slippage. Investopedia’s slippage guide explains why expected and actual execution prices can differ.
When market orders are risky
Market orders are especially risky when liquidity is thin, spreads are wide, news just hit, or you are trading outside regular hours. The SEC’s after-hours trading note highlights lower liquidity, wider spreads, and higher volatility as key risks.
Pre-trade checklist
- Are you looking at last price or live bid/ask?
- Is the bid-ask spread large relative to price?
- Will your order size sweep multiple levels?
- Is this regular hours or pre/after-market?
- What is your maximum acceptable slippage?
- If you do not need instant execution, can you use a limit order?
Check Yourself
What is the main difference between a market order and a limit order?
Suggested answer: A market order prioritizes execution but does not guarantee price; a limit order sets a price boundary but may not fill.
Further reading: FINRA Order Types · SEC After-Hours Trading · Bid-Ask Spread · Slippage
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