A market order is the simplest order type there is. Upon placing a Market Order, a user will initiate a transaction (sell/buy) at the current market price.
Market orders are orders based on the current market state and the supply-and-demand conditions that dictate the price. Market orders deal with the current market price and nothing else.
How it works
While Market Orders lack finesse and effectiveness of other order types, they can be especially convenient at markets with high liquidity, which means the order will very [possibly be filled soon or straight away, and in situations when there is (seemingly) an obvious trend that can be used to a player’s advantage. Market orders are sometimes favored by advanced users who know trading and markets well and are reasonably certain about the outcome.
Market orders provide the user with the opportunity to acquire (or sell) assets straight away, with no complications and as few nuances as possible. For example, if a user is confident the asset will trade at $200 within 10 minutes, they may choose to place a Market Order which will be filled in momentarily at the current market price, at which point the purchase price is not that relevant in terms of the great gain that will come afterwards. In short, market orders are there for users who must buy (sell) now.
There may not be visible complications as far as a new and enthusiastic user is concerned, but, this one being the least advanced order type there is, it comes with added hidden complications. One of those is slippage, which can be devastating, for example when selling at the best market price during sharp price drops and large volumes.
Market Orders are advantageous at times and places with high liquidity. Large spreads, however, and low daily volumes, will more than likely mean that the asset will be bought/sold after a significant amount of time, and large spread entail unexpected and often dramatically inconvenient outcomes.
Despite concerns of slippage, Market Orders often constitute one of the most popular order types with new users. Taking into consideration the widely discussed volatility of the cryptocurrency market the general recommendation is to use caution and use more advanced order types (like Limit Orders) that provide added protection.
Unlike with Limit Orders, there are no guarantees with Market Orders. Placing a large Market Order at a certain market price will mean the user will get some of the assets for the price they aimed at, and the others at the market price provided by the market, which will by that time have changed. With a lot of spread (the difference between the price an asset is sold and bought for), that can mean vast disadvantages when and if the price moves.
For instance, if a user wants to sell a 100 units at $100 each, 10 of them may be bought for $100, and, when the price goes down, 10 more for $90, which will be the market price at the time, 10 more for 70$, and so on. The resulting total will be considerably less than the expected amount. For that reason, Limit Orders (which allow setting a price limit at which assets can be bought/sold), are recommended for more predictable results.