Market Order vs Limit Order: How to Know When to Use Each One

Understanding how to place the right kind of trade can make a big difference to your investing journey—especially if you're just starting out.

Whether you're buying your first STI ETF or testing the waters with U.S. tech stocks, knowing when to use a market order or limit order can help you avoid unnecessary losses and stay in control of your money. This guide will break down both order types.

Let’s start with the basics.

A market order tells your brokerage to buy or sell a stock immediately at the best available price. It's fast and simple.

A limit order tells your brokerage to buy or sell only when the stock reaches a specific price that you set. If the market doesn’t hit that price or better, your trade won’t go through.

In Singapore, most brokerages—like Tiger Brokers, FSMOne, and OCBC Securities—let you choose between these two. Some even show the real-time bid/ask spread so you can decide which method suits your situation best.

Market orders are all about speed. When you use one, your trade is executed straight away at the current market price.

This allows you to get in or out of a stock quickly—great for fast-moving markets or sudden opportunities.

As such, market orders are ideal for liquid stocks like those in the Straits Times Index (STI), i.e. DBS, UOB, or Singtel, where there are usually plenty of buyers and sellers.

The catch is that in low-liquidity or very volatile markets, the price can shift between the moment you place the order and when it’s executed. This is called slippage and can cost you more than expected.

So if you placed a market order to buy 100 shares of a highly liquid tech stock listed on the NASDAQ, there could be a sudden price jump between the time you place the order and the time it is executed, and you might end up paying more than you wanted to.

The same goes for low-liquidity stocks. There are few buyers and sellers, so let’s say you placed a market order of 100 shares for a low-liquidity stock, by the time there’s a willing seller, the price may have changed, and you might once again end up paying more than you wanted to.

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Limit orders let you take control of the price. You set the price you’re willing to buy or sell at, and the trade only goes through if the market hits that number.

This gives you full control over the price you buy or sell at and is great for highly volatile stocks or low-liquidity stocks. You can also set limit orders overnight, so if a stock isn’t at your desired price now, if it reaches that price anytime overnight, your order will go through.

In fact, for more volatile stocks, often, when a market reaches your price, it can continue falling or increasing in your favour, and the order can be fulfilled at an even better price than what you specified.

That’s because limit orders are to be fulfilled at the price you specified or better, so if in the time it takes to execute your order, the price went further in your favour, you’d get the stock at that price.

The downside is that there’s no guarantee your order will go through. If the market doesn’t hit your target price, your trade won’t happen.

While this may sound safe to some investors who are worried about overpaying for a stock, don’t forget that if the stock keeps increasing in price and never falls to the price you want, you would also lose out on the gains that you would have made if you had just placed a market order and bought at the price earlier.

Nonetheless, when used correctly, limit orders can be great aids in your investing journey.

In Singapore, many working professionals have a 9-to-6 job and can’t stare at stock charts all day. As such, rather than spending time and energy analyzing charts, you can simply decide on a good price for a stock that would render it undervalued and place a limit order at that price.

For example, you can decide to buy Tesla shares—but only if the price drops below US$250. A limit order lets you set that condition and go about your day.

Platforms like Interactive Brokers or Moomoo are popular with Singaporean investors for this reason. These brokers let you use advanced order settings like Good-Till-Cancelled (GTC), which keeps your limit order active until it’s fulfilled or you cancel it.

There are either buy or sell limit orders. Buy limits are set at a price lower than the market price, so when the price falls and hits your target or lower, the order will execute.

On the other hand, sell limits are set above the market price and are only executed if the price goes up and hits your target or better.

Think of limit orders as your financial safety net. Instead of buying impulsively at whatever the market offers, you’re planning ahead to make the most of your money.

For example, let’s say DBS shares are trading at $33. You want to buy them, but only if they drop to $30. You place a buy limit order at $30 and wait. If the price hits that point, your order goes through, saving you $3 per share.

That $3 might seem small, but for 100 shares? That’s a $300 difference.

A great way to use limit orders in your overall investment strategy is to dollar-cost average and to set recurring buys at strategic price points.