In cryptocurrency trading, an order is an instruction to buy or sell on an exchange. To record the interest of buyers and sellers, the orders are listed in the order book. A matching engine uses the book to determine which orders can be matched with one another.
A variety of order types are available when trading digital assets on an exchange. Some guarantee execution, others guarantee price. Each type of order is a tool that serves to achieve a certain goal. Both Market Orders and Limit Orders are currently available on BTCMEX — Bitcoin Perpetual Contracts innovative trading platform.
A Market Order is a buy or sell order that is executed immediately at the market price and filled at the best available price from the order book. Market orders are used when certainty of execution is a priority over the price of execution, and its goal is to have the order filled quickly. In the cryptocurrency Derivatives market, the price paid or received may be quite different from the last price quoted before the order was entered due to high volatility.
A Limit Order is an order used to buy or sell at a specified price or better. The main purpose of these is to control the price of the trade, which does not guarantee instant execution. To place the Buy Limit Order, the target price must be set lower than the Last Trader Price, or it will be filled as a Market Order. The opposite applies to the Sell Limit Order, where the target price must be set higher than the Last Traded Price. The Last Traded Price is the internal price index of a cryptocurrency on the exchange. Limit Orders ensure that the order is not filled at a price less favorable than the set target price.
Limit Orders have several options: Good till Cancelled (GTC), Immediate or Cancel (IOC), and Fill or Kill (FOK).
- Good till Cancelled (GTC): The order is active until filled or cancelled by a trader.
- Immediate or Cancel (IOC): Any portion of the order that can not be filled immediately at the order price or better is cancelled.
- Fill or Kill (FOK): The entire order must be filled immediately at the order price or better, or it will be cancelled.
Both Market and Limit Orders are filled at the Last Traded Price on the exchange. You can learn about Dual-Price Mechanism used on BTCMEX here.
Order: An instruction to buy or sell on an exchange.
Market Order: A buy or sell order that is executed immediately at the market price.
Limit Order: An order used to buy or sell at a specified price or better.
Good till Cancelled (GTC): A condition when the order is active until filled or cancelled by a trader.
Immediate or Cancel (IOC): A condition when a portion of the order that can not be filled immediately at the order price or better is cancelled.
Fill or Kill (FOK): A condition when the entire order must be filled immediately at the order price or better, or it will be cancelled.
