Friends, whenever we talk about share market
it is very important how you are placing an order
when you are buying a share
while placing an order, you have a lot of options
but the two most important options to buy a share are
those two options are Market Order and Limit Order
Now you would like to know what is the difference between them
and when you should place, what kind of orders
so that you can get the maximum benefit while buying any shares
I, Jagdeep Singh, Welcome you all to the Groww Channel
In this video, we will talk about market order and limit order
we will explain to you in detail on what is a market order
and what is its significance
and in what scenario, you should place a market order
and here if we talk about a limit order
that when is a limit order important
and how you should place a limit order
Let's start today's video!
First, I will talk about the market order
So friends, before understanding market order and limit order
you should know how a market operates
Now you know there is an exchange where buying and selling transactions happen
If I give you an example of mandi instead of the exchange market
that how a mandi functions
So friends, assume if you are going to buy something in a mandi
there is a pricing or a transaction
where the buyer gives his money
and the seller receives the money
and delivers the product
and when this transaction occurs, one order gets completed
which means a transaction gets completed
Friends, If I talk about share market
even here the same kind of transaction occurs
But the transaction which takes place here is of shares or of money
which means one party gives the money and buys the share
and the other the party gets money and delivers the share
so friends whenever we talk about the order
then in market, there are a lot of people
One side of people say we want to sell
and another side of people say they want to buy it
and when both these sides reach a mutual understanding
then their order becomes successful
which means the buyer gets their quantity
and the seller gets that much of money
Friends, you would have seen in share market
that a particular share gets traded at some price
Say if I give you an example of the share A
Share A's price as of now is Rs. 100
but in a second, it goes from Rs. 101 to Rs.102 or gets reduced to Rs. 99 to Rs. 98
which means the prices fluctuate a lot when the market is very volatile
Now if I talk about market order
so how does market order functions
In a market order, when you place an order of any share to buy it
you say you want to buy this particular share
I want to buy share A
and put a quantity that you want to buy this much quantity
Like the first example is you want to buy Share A's 20 quantity
so what you do for it is
you place a market order
and what happens in market order is that your order goes to the stock exchange
that market order when reaches exchange
tells that if any seller is ready to sell Share A
at any price, at that given point of time
then that transaction takes place
When a person first noticed, the price was Rs. 100
then when he placed the market order
by the time order got executed
by the time it reached there, the price became Rs. 102
The risk in the case of the market order is that
you say you want to buy this particular share
at whichever price it is available, I want this particular share
In the case of a market order, your order directly goes and gets executed
later you get to know at what price your order has been executed
Like friends, I explained to you in the case of the market order
your order goes to exchange, you tell the quantity you want to buy
or how much quantity you want to sell
so in place of the counterparty whichever party is sitting there
gets your particular order executed
after which the transaction gets completed
and you will be informed of the average price
It's not necessary in the case of market order that at the price you now see the share
at that price your buying or selling happens
so in that fraction of second till the order gets executed
till then you won't get the share price
and there if I talk about Limit Order then
so what happens in the case of limit order
so whenever you want to place a limit order
so here you have to mainly give two inputs
first input tells you about the quantity
Here we were talking about share A
you fill it here that you want to buy 30 quantity of share A
and the second input which is taken from you is of price
cause in the case of the limit order, the investor tells
that at what price his order should get executed
say if an investor says his order should be executed at Rs. 100
When he would be placing the limit order
he will put the quantity as 30 and price as Rs. 100
thus his order would get placed in exchange
but till the time, the price doesn't come to Rs. 100
his order would not get executed
In the case of the limit order, your benefit is that
at a fixed price
you know at what price you want to buy these shares
so there are no chances that you will get your order
at a higher price than your quoted price
so now the question arises
that in case of the limit order, does it happen
that I put in the price of Rs. 100 and my order goes off
and the market price of share did come to Rs. 100
but my order didn't get executed
How is it possible?
So friends, say you quoted the order at Rs. 100
like you, the other 10 investors quoted the price at Rs. 100
so who puts in the order first, their order gets executed first
so when the price came down to Rs. 100
so the sellers available there were only offering the quantity
that could be given to minimum investors
so a scenario can happen in that case
that the market comes down to that particular price
but your order does not get executed
so this can happen in the case of market
so this is the difference between a market order and limit order
In a market order, the input you put is only of the quantity
what quantity you want to buy
and what quantity you want to sell
and in a limit order, you put both price and quantity
you tell at what price you want to buy and what quantity you want to sell
and you tell what quantity you want to buy and what quantity you want to sell
Generally, it is told that placing a limit order can benefit you more
cause here you know the price and if there is a lot of volatility
in a fraction of second then you won't face any losses
assume if the market comes to that price
then you get your order fulfilled at that price
Now the question which arises in the case of a limit order is
assume that you put an order of share A at Rs. 100
and that particular share's price was Rs. 102
and if in the whole day, if the price doesn't come down to Rs. 100
what would happen with your order
so, friends, your limit order gets canceled at night
the broker usually cancels the limit orders
And friends, one more interesting question comes out in the case of limit order
Assume that the current share price is Rs. 90
and I put in the limit order that I want to buy at Rs. 100
so will my order get executed at Rs. 100 or at Rs. 90
so friends, the order which gets executed here is at best price
If I give you an example of the best price then
Assume that the current price was Rs. 90
and you put in the limit price of Rs. 100
so your best price here is Rs. 90
cause if you get a particular share at Rs. 90
it would be profitable for you
so here your particular order gets executed at Rs. 90
same happens in the case of selling
so the limit order gets executed at the best price
exchange pays attention to properly execute this
So friends as we spoke of market order and limit order
many people also want to know
what is a stop loss and how is it beneficial for you
Friends if we talk about stop-loss
so whenever we place a market order
Assume you say that you want to buy a particular share at Rs. 100
and at the same time, you think if a particular share goes down below Rs. 90
then you want to sell it off cause you can't take more loss than this
so in that case, you place a stop-loss order
where you put the price when you are buying
so at that time itself, you can put in a stop-loss order
so that if a particular share price reaches below a particular price point
you would sell off the shares
so stop loss can help you in reducing your losses
so that you can cap your losses
Friends, the video is only for educational purpose
we wanted to tell you the difference between a market order and limit order
and what is the benefit an investor can get from a particular order
Friends, both the order are right at their places
both the functionalities have been given to you
by using both the functionalities
you can decide according to your personal investment lever
whether you should place a market order or a limit order
but when the market is very volatile, it is suggested that you place a limit order
cause there the negative impact of volatility can be negligible
Friends, if you liked this video
then like this video
Comment and tell us what order do you usually place, market order or a limit order
and friends, suggest us what topics should we cover for our next videos
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