How to use limit order as a market order?

A trade can sometimes be executed at a price that is different from what a trader expects, especially when there are very few buy or sell orders for that particular instrument. This can occur in situations where liquidity is low or when a large market order is executed and there are not enough matching orders at nearby price levels.

Using a market order can result in fast execution, but there is a risk that the trade may be filled at an unfavourable price. A limit order, on the other hand, is only executed at the price you set or better. This gives more control over the price at which the trade is executed, although the order may not be filled if the market does not reach the specified price.

Limit orders can also be used in a way that allows them to work similarly to market orders. For example, placing a buy limit order at a price higher than the current market price or a sell limit order at a price lower than the current market price can increase the chances of quick execution. At the same time, the limit price still sets a clear boundary, helping to avoid execution at a much worse price. This method offers a balance between controlling the execution price and improving the chances of the order being filled.

Use limit orders as market orders.

When a buy limit order is placed with a price higher than the current market price, the limit order functions as a market order, offering market protection at the specified limit price.

Example Scenario

1. The current market price of ITC is ₹241, and a limit buy order is placed at ₹245.
2. Since the price is ₹241 and the intended purchase price is higher, the order will act as a market order and execute immediately.
3. Consequently, all quantities up to ₹245 will be filled.
4. In the event of a large market order coinciding with the order and causing a price spike, the limit order provides protection by capping the buy price at ₹245.
5. This ensures that the buy price does not exceed the specified level, offering a safeguard against further price escalation.

Similarly, when a sell limit order is placed with a price lower than the current market price, the limit order functions as a market order.

Example Scenario

1. Let's assume a long position is held on Nifty 17500 CE, with the current price standing at ₹185.
2. A limit sell order is placed at ₹180, despite the current market price of ₹185 being higher.
3. The order will function as a market order, executing immediately and selling all available quantities up to ₹180.
4. If a large market order coincides with the placed order and causes a price spike, the limit order acts as protection.
5. The sell price is capped at ₹180, preventing it from going lower and providing a safeguard against further price decrease.

To learn how to use Stoploss-limit(SL) order like a Stoploss-Market(SLM) order, see How to use Stoploss-limit(SL) order like a Stoploss-Market(SLM) order?