A market order is an order to quickly buy or sell at the best available current price. It needs liquidity to be filled, meaning that it is executed based on the limit orders that were previously placed on the order book.
Unlike limit orders, where orders are placed on the order book, market orders are executed instantly at the current market price, meaning that you pay the fees as a market taker.
Let’s say you want to create a market order to buy 2 Binance Coins. After logging in to your Binance account, choose the BNB market you want (e.g., BNB/USDT) and go to the trading page. Then, find the Market order tab, set the amount to 2 BNB, and click the Buy BNB button.
After that, you will see a confirmation message on the screen, and your market order will be executed.
Since market orders are executed right away, your market buy order will match the cheapest limit sell order available on the order book, in this example 2 BNB for 5.2052 USDT each.
But let’s say you want to buy 500 BNB at the current market price. The cheapest limit sell order available will not be sufficient to fill your entire market buy order, so your order will automatically match the following limit sell orders, working its way up the order book until it is completed. This is called slippage and is the reason why you pay higher prices and higher fees (because you are acting as a market taker).
When should you use it?
Market orders are handy in situations where getting your order filled is more important than getting a certain price. This means that you should only use market orders if you are willing to pay higher prices and fees caused by the slippage. In other words, market orders should only be used if you are in a rush.
Sometimes you might be in a situation where you had a stop-limit order that was passed over, and you need to buy/sell as soon as possible. So if you need to get into a trade right away or get yourself out of trouble, that's when market orders come in handy.
However, if you're just coming into crypto for the first time and you are using Bitcoin to buy some altcoins, avoid using market orders because you will be paying way more than you should. In this case, you should use limit orders.