Trading & Orders

Market Order vs Limit Order

A market order buys or sells immediately at the best available price; a limit order only executes at your specified price or better.

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When you instruct a stockbroker to buy or sell shares, you must specify the order type. The two most fundamental types are market orders and limit orders.

A market order instructs the broker to execute the trade immediately at the best currently available price in the market. It prioritises speed of execution over price certainty. In liquid markets, the execution price will be close to the last traded price. In illiquid markets, the bid-ask spread can mean the execution price is materially worse than expected.

A limit order sets a maximum price you are willing to pay (for a buy) or a minimum price you are willing to accept (for a sell). The order will only execute if the market reaches your specified price. Limit orders give price certainty but not execution certainty — if the market never reaches your price, the order may expire without being filled.

On the CSE, limit orders are generally preferred for all but the most liquid stocks. Given that many CSE-listed stocks trade in low daily volumes with wide bid-ask spreads, placing market orders can result in significant "slippage" — executing at a much worse price than anticipated.

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On the Colombo Stock Exchange

For stocks with low daily turnover on the CSE, always use limit orders. Check the current best bid and ask prices on your broker's trading platform before entering any order.

Example

The last traded price is LKR 80. You place a limit buy order at LKR 78. If the stock trades down to LKR 78 during the session, your order fills. If not, it remains open.

Related terms

Frequently Asked

What is Market Order vs Limit Order?

A market order buys or sells immediately at the best available price; a limit order only executes at your specified price or better.

How does this apply to the Colombo Stock Exchange?

For stocks with low daily turnover on the CSE, always use limit orders. Check the current best bid and ask prices on your broker's trading platform before entering any order.

Can you give a practical example?

The last traded price is LKR 80. You place a limit buy order at LKR 78. If the stock trades down to LKR 78 during the session, your order fills. If not, it remains open.