Understanding Crypto Order Types in Exchanges

Limit Order

A limit order allows you to buy or sell a cryptocurrency at a specific price or better. When you place a limit order, you set the price at which you are willing to buy or sell. This order will only be executed if the market price reaches your set price.

Example: If you want to buy a Bitcoin at $30,000, you can set a limit order at that price. If Bitcoin’s price drops to $30,000 or below, your order will be filled.

It is important to note that if the set price is higher than the current market price, then it may lead to an immediate fill. So, it provides you more control over the price at which you trade, which is useful in volatile markets. However, they also require patience because the order will not get executed if the asset’s price doesn’t reach the specified price on the order.

Market Order

A market order is the simplest and quickest way to buy or sell cryptocurrency without any restriction on pricing. When you place a market order, you are agreeing to buy or sell at the best available current price. This means your order will be executed immediately, making it ideal for situations where you need to enter or exit a position quickly.

Example: If you want to buy Ethereum at $20,000 and the market price is at $20,000, you can place the order and as per the match it’ll immediately get executed. However, if the price has moved to $20,500, your order will still be executed, but at that price.

These market orders are very straightforward and efficient for ensuring that your trade goes as soon as possible with the pricing, but they offer less control over the execution price compared to limit orders. Therefore, only two possibilities are there in market orders, i.e. immediate purchase can happen or else it won’t be executed.

Other Order Types

There are different other order types such as stop limit, stop loss, etc. which will be discussed in detail further. They offer a certain range to you for trading in which either your order can get executed if the market price comes in that or else will get rejected. Even for minimizing the losses, you have an option to fix the maximum threshold up to which you can handle. So, let’s learn more about these order types in detail:

Stop Limit Order

This type of order combines the features of both stop order and limit order, allowing traders to specify a stop price and limit price. Once the stop price is reached, the order becomes a limit order, which will only be executed at the limit price or better. This way, you protect yourself from selling at a very low price while still aiming to exit if the price starts to fall more.

Example: If you own Bitcoin currently trading at $30,000 and you want to sell if it drops to $28,000, but not less than $27,500, so you can set a stop limit order with a stop price of $28,000 and a limit price of $27,500 to manage your loss within a specific limit.

Stop Loss Order

A stop loss order is in the trend for limiting an investor’s loss at a position. You set a stop loss order by specifying a stop price below the current market price for a long position. If the market price falls to or below the stop price, a market order is triggered to sell an asset.

Example: If you bought Ethereum at $2,500 and want to limit your losses, you could set a stop loss order at $2,300. If the price drops to $2,300, your order will get executed for selling, helping you avoid any further losses. Otherwise, it’ll remain there until the position is closed.

Take Profit Order

A take profit order is used to lock in profits once a target price is reached. When the market price hits the specified target, the order is executed to sell the asset in profit at the set price. However, there are limit orders too, in which there’s no guarantee if the market doesn’t reach the specified price.

Example: If you bought Solana at $100 and aim to sell it at $150, you have to set a take profit order at $150. When the price of Solana reaches that point, the order is executed automatically, ensuring your profits are made without regular analysis of the market patterns.

Trailing Stop Order

This is a very dynamic order and adjusts itself as the market price moves in your favour, locking in profits while protecting against losses. You can set a trailing amount, either as a percentage or a fixed amount below the current market price. This helps in maximising the profits during price uptrends, and flexibility in managing trades without regular monitoring.

Example: If a Bitcoin is traded at $30,000 and you set a trailing stop of $1,000, the stop loss would be finally $29,000. If Bitcoin’s price rises to $33,000, the stop price adjusts to $32,000. Now, if the price falls to $32,000, the stop loss triggers and sells your Bitcoin, locking in the profit.

More Order Types

There are few more order types in the market, namely:

Fill or Kill (FOK) Order: This is an order that must be executed immediately and in complete form, or not at all. If the order cannot be fully filled at the specified price right away, then it gets cancelled.

Immediate or Cancel (IOC) Order: This is very similar to FOK order, but it allows for partial filling. If the order cannot be filled completely for execution at the specified price, then the filled portion will get executed and the remaining ones will be cancelled.

Good Till Cancelled (GTC) Order: This type of order remains active until the trader decides to cancel it or get it executed. This order type doesn’t expire at the end of the trading day and remains open indefinitely until the specified conditions are met.

Day Order: A day order is only valid for the trading day on which it