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If we assume a situation where all the Limit Orders for a stock have been executed. The Market Price is say $100 for the stock. No further Limit Orders come in, either for Buy or Sell.

However, the following Market Orders come in:
BUY of Quantity 10
SELL of Quantity 20

What would happen in this case if we assume FIFO for Order Matching?

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The obvious thing would happen. 10 shares change owner at the price of $100. A partially still open selling order would remain.

Market orders without limits means to buy or sell at the best possible or current price.

However, this is not very realistic. Usually there is a spread between the bid and the ask price and the reason is that market makers are acting in between. They would immediately exploit this situation, for example, by placing appropriately limited orders. Orders without limits are not advisable for stocks with low trading activity. Would you buy or sell stuff without caring for the price?

  • Ah I see. So in the situation of there being a Limit Order of BUY@90 and a Market Order for BUY. Now if a Market Order of SELL comes in, would it get matched with the BUY Limit Order (@$90) or BUY Market Order (@$100)? I'm trying to understand who the Market will favour. Thanks @Trilarion – MovieMe Sep 29 '17 at 9:48
  • @Barry That probably depends on the marketplace and its specific matching rules. If it's strictly firs come, first served, it may be the limited buy order, but if it gives higher priority to market orders it might be the unlimited buy order. Do you have a specific market place in mind? – Trilarion Sep 29 '17 at 10:04
  • the only info I have right now is Price/Time priority model is used. @Trilarion – MovieMe Sep 29 '17 at 10:08
  • @Barry If you look at the Eurex article you see that they give market orders always highest priority. That's equivalent to giving them an equivalent price limit of +Infinity (Buy orders) and 0 (sell orders) in the Price/Time Model. That means they will be matched first. The market effectively favors the smallest spread and matches market orders first. It's still risky, because there might not be a market order in the opposite direction. I wouldn't advise it. – Trilarion Sep 29 '17 at 10:17

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