Types of orders in the Cryptocurrency exchange platform
An in-depth analysis of the cryptocurrency order trading for a novice trader to become a pro-trader
When the entire online media heralded the surpassing of cryptocurrency trade execution reached 1 trillion dollars, we can know about the reach of cryptocurrencies in the investment markets. From a no-trust zone to an undeniable economical reach is not an easy task. While more people are interested in trading in cryptocurrencies, they do not have enough knowledge in the type of trades and in the orders. Apart from the trades, it is the order books that precisely depict the market stake and what type of trade is going on in the crypto market. So, it is more essential to know about the order books before leaping in to invest in cryptocurrencies.
This blog will help you to know about the major types of order books in the cryptocurrency exchange platforms and other order book types so that you can trade like a pro.
Types of Orders:
Despite many types of orders, there are four major types that most of the exchange platforms focus on.
- Market order
- Limit order
- Stop order
- Stop limit order
It is the type of order in which the trade is placed at the best available rate based on the asset pair in the crypto market. It is the basic trading type where you cannot select the price and you have to buy or sell the trade. It all depends upon the current trade value of the particular coin over the asset pair available on the order books.
A trader who wants to initiate a trade in the market order would be specifying the amount that he wants to buy or sell on that particular cryptocurrency. It is the market that determines the current best price for the cryptocurrency. The order will continue to be traded until the exact desired order is executed. For instance, if you are planning to buy or sell 1 BTC at the BTC/USD trading pair, then the trading algorithm will continue the trade until the 1 BTC is traded at the best current price in the crypto market. It is to be noted that market order will not diversify the trade to split and sell or buy according to your wish. Market orders are established entirely and the prices are not determined by either the investor or admin. It is purely based on the current best rates in the market. But they do face certain challenges — some of the most notable ones — slippage and liquidity in trading pairs.
How to use Market order?
- Initially, the user has to use any exchange platforms or third-party API servers to send or buy crypto using a market order.
- He has to enter the information regarding the amount that he wants to spend the required cryptocurrency.
- Once the amount is entered the user can click “ SEND BUY ORDER”; “SEND SELL ORDER”.
- The trading algorithm will find the best trade to execute the trade for the desired cryptocurrency.
A limit order is a concept in an order book where you can make your users buy the cryptocurrencies at a certain limit. It is where the particular trade is bought on a limit price or price lower and sold on the limit price or price higher. For instance, you are planning to buy 1 ETH at 1200 USD and the market fluctuates at 1205 USD, then you could buy the trade for 1203 or 1204 USD. Similarly, while you are selling, the limit would be set at the price that you have bought and sold at the price higher than the prescribed limit. That is, you can sell the ETH for 1205 USD based on the market fluctuations. That is known as the Limit order. You can initiate your limit order on the open orders in the cryptocurrency exchange platforms so that they lock the trade until it is bought or sold on the specific limit prices.
It is the order that helps you to fix the price of the particular trade where you want to buy or sell. Stop order offers you the choice to choose the trade limits. That price is called the Stop price. That means you can buy the trade when it reaches the specified stop price level, and sell it accordingly based on the specified stop price level. It is based on your option, the trade will be executed. Until then it will be locked by the Admin of the cryptocurrency exchange platform.
There are certain scenarios that you should take the stop order. One, if you are predicting the stock is going to rise in the future because of its demand, then you can fix the limit where you want to stop and sell the particular trade because, when it reaches saturation, then it will slide down again. Two, the prices are dropping and you know that it will not rise, then you can decide to stop the maximum loss and sell your trade at the lowest loss possible.
For example, you have bought a coin considering the fact that it will rise and it rises, you can fix the limit where you want to stop and sell the coin. Similarly, the coin goes down in prices and you know that it is not rising, then you can stop the trade at a particular level and save maximum loss.
It is a combination of both the stop order and the limit order. It is done by fixing both stop price along with the limit price so that the trade can be executed at the limit price where the exact stop price is predicted. To be short, if a particular trade reaches the stop price, the trade will be transformed to the limit price. The remaining unfilled balance will be put to the limit price and the trade is conducted on the limit order and sold or bought on that order level.
For instance, if you own a bitcoin at $ 34000 and you know that the price of the BTC will go down. So you fix a stop price at $33800 and a limit price of $33500. So, the trade would go live for the stop price, and once the price reaches the stop price, for example, you have sold 0.4 BTC would be sold at your stop price. The remaining 0.6 BTC would be sold at the limit price on an open order.
Apart from the basic order types, there are several other order types where you can buy or sell trades accordingly. Let us take a look over that.
- FOK ( Fill or Kill) order — This is a lifetime order which is determined by the market fluctuations. Either they get filled or get killed. That means it defines — “All or None” based order.
- IOC (Immediate or cancel) order — this is the order in which the entire or part of the trade is executed immediately and the remaining order is canceled or redeemed. They are referred by other indications — OCO, OSO, and OCA.
- Stop-loss order — this is the order where you want to stop the loss behind the very low dip. For example, your bought BTC for $34000, you fixed the stop price at $36000, and the prices are dipping and you want to stop the loss of your BTC investment at $33, 800, you can fix the stop-loss price at that particular price.
- Trailing stop order — Trailing stop is determined based on the market volatility and to minimize the losses. They do perform like a stop order, but they determine the price in means of percentage. For example, if you have a bitcoin at $34,000 and you want to sell them at a trailing loss of 2%, then the trade would end at $33,220, but if the prices hike to $38000, then the trade would be sold only at $37240. So, it minimizes the loss and manages the profit.
- Brackets — This is a conditional order where you can fix the entire trading thing in a particular bracket and make it more automated. For example, you have a bitcoin at $34,000 and you fix the limit high at $38000 and want to stop the loss at $33,800, then that is a conditional bracket order.
- Iceberg / Hidden — This is similar to the iceberg concept. That means the small portion of the trade is out for selling and the large portion would be hidden, which is out of the trade potential for future high profits.
- Good-till-cancel order — This is the order when it is good until it is filled or it is canceled.
With all the major types of orders and other types of orders, you would have got a piece of knowledge on how to invest and trade in the cryptocurrency exchange platform. So, if you are about to start a cryptocurrency exchange software platform, make sure that you have included all these major trade types to increase visibility and user engagement.