TL;DRAn order to buy or sell immediately at the best available price. Market orders guarantee you get in or out of a position. They do not guarantee the price you'll get.
A market order tells your broker: fill me right now at whatever the current price is. There's no price condition. You accept whatever the market is offering at the moment your order reaches the exchange.
When you place a buy market order, you're filled at the current ask price (the lowest price someone is willing to sell at). When you place a sell market order, you're filled at the current bid price (the highest price someone is willing to buy at).
Market orders are the right choice in two situations. First, when you need to exit a losing position immediately. If the market is moving against you, a market order gets you out. A limit order might not fill if the market is moving fast.
Second, when entering a breakout where speed matters more than price. If a key level breaks and you expect a fast move, a market order gets you in.
In liquid markets like ES during regular trading hours, the cost of a market order is typically just the bid-ask spread (one tick, or $12.50 per contract).
Slippage is the difference between the price you expected and the price you actually received. In calm markets with good liquidity, slippage on a market order is usually zero or one tick.
Slippage increases during major news events (NFP, FOMC, CPI), during low-liquidity sessions (overnight Globex, pre-market), and when placing large orders relative to the available liquidity.
In extreme cases, like a flash crash or a gap on a limit-down opening, slippage can be many points.
Market orders fill immediately at the current price. You always get filled but you don't control the price.
Limit orders fill at your specified price or better. You control the price but you might not get filled.
Stop orders become market orders when a trigger price is reached. They guarantee execution after the trigger but not the fill price.
Most traders use a combination: limit orders for entries and profit targets, stop orders for stop losses, and market orders for urgent exits.
Clean fill in liquid market
ES is trading at 5,200.00 bid / 5,200.25 ask during regular trading hours. You place a buy market order for 1 contract.
You're filled at 5,200.25 (the ask). The cost of using a market order instead of a limit order is one tick ($12.50). In most cases, this is an acceptable cost for immediate execution.
Slippage during news
CPI data comes out hotter than expected. NQ drops 40 points in 3 seconds. You have a sell stop at 18,500 that triggers.
Your stop triggers at 18,500 and becomes a market order. But by the time it executes, the best bid is 18,492. You're filled 8 points ($160) worse than expected. This is slippage, and it's a normal risk of stop orders in fast markets.
Using market orders during overnight or pre-market sessions
Liquidity is thin outside regular trading hours. The bid-ask spread can be 2-5 ticks or more. Use limit orders during these sessions.
Placing large market orders in less liquid products
A 10-lot market order in ES during RTH is fine. A 10-lot in a thinly traded agricultural contract could move the price against you.
Assuming your stop loss will fill at exactly the stop price
Stop orders become market orders when triggered. In fast markets, the fill price can be several ticks beyond your stop.