What is a Market Order?

The recent volatility in the financial market has led to panic selling of assets, and the cryptocurrency market is not spared. Ann expected that BTC price will continue to fall under this predicament. Thus, she decided to go short 200,000 BTC contracts at the current market price.

Ann wants to get hold of the market trends as quickly as possible. For this purpose, she chooses the Market Order to execute immediately.

So, what exactly is a Market Order?

A Market Order is to buy or sell at the best available price in the current market. Traders can pre-set leverage and contract sizes, but not the execution price.

In Ann’s case, she shorts 200,000 BTC contracts with market order.

The last traded price is $7,322.5. Given the order book, if Ann’s market order is placed immediately, it will be executed as follows:

138,288 contracts are matched at the best bid price of $7,322, and the remaining 61,712 contracts are sold at the second best bid price of  $7,321.5. Therefore, the average execution price can be calculated as: 

200,000 / [(138,288 / 7,322) + (61,712  / 7,321.5)] = $7,321.85

As we can see that the executed price is  $7,321.85, which is $0.65 different from the last traded price and $0.15 different from the best bid price. This difference increases total trading cost, and we call it ‘slippage’.

Taker Fees of Market Order

Market orders are executed at the best available market price and consume market liquidity as liquidity takers. And thus, traders placing market orders will pay trading fees as takers, which is 0.075% of the transaction volume.

Pros and Cons of Market Order

✓ Guaranteed Execution: The market order will be immediately executed as long as the market depth is sufficient. 

×  Market orders cannot guarantee execution price. The executed price may be higher or lower than the last traded price, and large order may experience significant slippage if market depth is poor.

How to place Market Order?

Ann intends to set 10x leverage to short 1,000 BTC contracts using market order. How is she going to set it on Bybit?

First, select the “Market” option and you will be brought into the order page. After setting the leverage and quantity, click on the “Sell/Short” button.

Click the “Confirm” button after checking order details. The market order will be executed immediately at the best available price.

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