#Definition
A market order is an instruction to buy or sell shares immediately at the best available current price. It guarantees execution but not price; your trade will happen, but you may pay more (when buying) or receive less (when selling) than the displayed price if the market moves or lacks depth.
In prediction markets, market orders are the "get me in now" option. When news breaks and you need to act fast, a market order executes instantly. The tradeoff is potential slippage, paying worse prices as your order consumes available liquidity.
#Why It Matters in Prediction Markets
Market orders serve specific but important purposes:
Guaranteed execution
When you absolutely need to enter or exit a position, market orders ensure your trade happens. A limit order might sit unfilled while the opportunity passes.
Speed in fast markets
During breaking news or rapid price movements, market orders capture opportunities before they disappear. By the time your limit order fills, the edge may be gone.
Simplicity
No need to determine the "right" price. You accept whatever the market offers. This can reduce analysis paralysis in time-sensitive situations.
Exit certainty
When you need to exit, to stop losses or redeploy capital elsewhere, market orders guarantee you're out, even at unfavorable prices.
#How It Works
#Execution Mechanics
When you submit a market buy order, it matches against the lowest-priced sell orders in the order book:
Order Book State:
Sells: 50 shares @ $0.60
50 shares @ $0.62
100 shares @ $0.65
Your order: Market Buy 150 shares
Execution:
- Buy 50 @ $0.60 = $30
- Buy 50 @ $0.62 = $31
- Buy 50 @ $0.65 = $32.50
Total: 150 shares for $93.50
Average price: $0.623
You wanted shares at 0.623 average because you consumed all available liquidity at lower prices.
#Slippage Visual
#Slippage Calculation
Expected price: $0.60 (best ask when order placed)
Actual average: $0.623
Slippage: $0.023 per share (3.8%)
Total slippage cost: 150 × $0.023 = $3.45
#Order Size and Slippage
| Order Size | Average Fill Price | Slippage |
|---|---|---|
| 50 shares | $0.60 | 0% |
| 100 shares | $0.61 | 1.7% |
| 150 shares | $0.623 | 3.8% |
| 200 shares | $0.635 | 5.8% |
Larger orders create more slippage because they consume more depth.
#Slippage Calculator Example
Estimating cost before you trade:
| Order Size | Available Depth | Avg Price | Slippage Cost |
|---|---|---|---|
| $100 | 0.60 | $0.60 | $0 (0%) |
| $1,000 | 0.60, 0.62 | $0.61 | $10 (1%) |
| $5,000 | Above + 0.70 | $0.68 | $400 (8%) |
Rule of Thumb: If your order > 10% of the visible book, expect > 1% slippage.
#Numerical Example
Breaking news: An election outcome is announced. You want to buy Yes immediately.
Market state:
- Best ask: $0.55 (100 shares)
- Next ask: $0.58 (200 shares)
- Next ask: $0.62 (500 shares)
Your order: Market buy 400 shares
Execution:
100 @ $0.55 = $55
200 @ $0.58 = $116
100 @ $0.62 = $62
───────────────────
Total: $233 for 400 shares
Average: $0.5825
While the "price" was 0.5825 average: 5.9% slippage. In a fast-moving market, this might still be profitable if the price continues to $0.80.
#Examples
#Example 1: Breaking News Trade
News breaks that a company deal is approved. The Yes price is currently $0.50 but rising fast.
Market order strategy: Buy immediately at market
- You pay $0.54 average (some slippage)
- Price continues to $0.70 within minutes
- Despite slippage, you captured the move
A limit order at $0.50 would never have filled as the price never returned.
#Example 2: Panic Exit
You hold a position that's collapsing. Price fell from 0.45 and news is worsening.
Market order strategy: Sell everything at market
- You receive $0.43 average (slippage in falling market)
- Price continues to $0.20
- Despite poor execution, you avoided worse losses
#Example 3: Thin Market Disaster
You want to buy in a low-volume market. Best ask shows $0.50.
Market order in thin market:
- Only 20 shares at $0.50
- Next 30 shares at $0.65
- Next 50 shares at $0.80
Buying 100 shares averages $0.70; 40% above the displayed price. This is why market orders are dangerous in illiquid markets.
#Example 4: High-Volume Market
A major election market with millions in volume. You want to buy $1,000.
Market order in liquid market:
- Deep order book: thousands of shares at each price level
- $1,000 order fills entirely at best ask or within 0.5%
- Slippage is negligible
In highly liquid markets, market orders are less costly.
#Risks and Common Mistakes
Fat finger errors
Accidentally entering a large market order in a thin market can cause massive slippage. You could pay 0.50.
Assuming displayed price
The price on screen is the best available for small quantities. Your order may fill far from this price.
Front-running and MEV
On blockchain-based markets, pending market orders are visible. Bots can front-run your order, buying before you and selling to you at higher prices.
Chasing momentum
Using market orders to chase rapidly rising prices often results in buying at local tops. By the time your order fills, the price may already be reversing.
Ignoring slippage costs
A 5% slippage on a market order might eliminate the edge you were trying to capture. Factor execution costs into trade decisions.
#Practical Tips
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Use market orders sparingly: Reserve them for situations where execution speed genuinely matters more than price
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Set slippage tolerance: Most interfaces let you set maximum acceptable slippage (e.g., 2%). If slippage would exceed this, the order fails
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Check order book depth first: Before submitting a market order, look at the order book. If depth is thin, consider a limit order instead
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Size appropriately: In thin markets, use smaller orders. A 10,000 order might not
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Default to limits: Unless you have a specific reason for immediate execution, prefer limit orders
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Understand platform mechanics: Some platforms simulate market orders using aggressive limit orders. Know exactly how your order will execute
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Monitor execution quality: Track the prices you actually receive versus displayed prices. This reveals how much slippage is costing you
#Critical Warning: Illiquid Markets
Never use market orders on illiquid markets. If a market has low depth, a $100 market order could sweep the entire book and execute at an average price of 99¢ instead of the displayed 50¢. Always check the Market Depth or use a Limit Order to protect yourself from slippage.
#Related Terms
#FAQ
#When should I use a market order instead of a limit order?
Use market orders when: (1) breaking news requires immediate action, (2) you're cutting losses and need guaranteed exit, (3) the market is highly liquid with tight spreads, or (4) missing the trade would be worse than paying slippage.
#Why did my market order fill at a much worse price?
The "price" displayed is typically the best available price for small quantities. Larger orders consume available liquidity at progressively worse prices. This is slippage, and it's more severe in thin markets.
#Do market orders cost more in fees?
Often yes. Most platforms charge higher "taker" fees for market orders because they remove liquidity from the order book. Limit orders typically receive lower "maker" fees.
#Can I cancel a market order?
Usually no; market orders execute immediately. By the time you could cancel, the order has already filled. Some very large orders might take time to fully fill, allowing cancellation of unfilled portions.
#What is slippage tolerance?
Slippage tolerance is a setting (often 1-5%) that cancels your market order if execution would be worse than a specified threshold. Setting 2% slippage tolerance means your order fails if average fill price is more than 2% worse than expected. This protects against catastrophic execution in volatile or thin markets.