How Does the ‘Limit Order’ versus ‘Market Order’ Choice Relate to Market Impact?

A market order is executed immediately at the best available price, guaranteeing execution but not the price, leading to high market impact for large volumes. A limit order specifies a maximum buy or minimum sell price, guaranteeing the price but not execution.

Large block traders prefer limit orders or sophisticated execution algorithms to control price and minimize market impact, only using market orders for small, urgent fills.