Main Types of Orders: Market, Limit and Stop-Limit

Trading on a cryptocurrency exchange provides many options for gaining profit, boosting your portfolio and investing. However, be it a great number of cryptocurrencies, various trading techniques, trading terminology — all this needs time to be analysed and understood. To facilitate your immersion into the crypto world we have evaluated the main types of orders and their functions so that you can use them depending on your needs.

Market Order

The simplest of all existing orders is the market order. Placing a market order is considered the best way to start a trading experience as you can quickly get in and out of a trade. A market order is fulfilled immediately at the current market price. You cannot specify the price in this case. Before there are traders who are willing to buy or sell, these types of orders can be filled. Use this order when the certainty of execution is the top priority and the price of execution is less important.

Limit Order

A limit order does not work immediately as the previous order type but is completed at a price specified by a trader. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher.

Limit Order to Buy = at or below the market

Limit Order to Sell = at or above the market

Use a buy limit order whenever it appears that an asset is initially reduced in price and after reaching the set level will increase. Use a sell limit order when you think it will first go up in price and after reaching the set level will get to go down.

The biggest advantage of this order type is that you can determine the price. Though it is not guaranteed that it will be executed, as it depends on the market price.

Stop-Limit Order

A stop-limit order is a combination of a stop order and a limit order. It comes into play once a stop price is reached. After this condition is fulfilled, a stop-limit order becomes a limit order. So a stop-limit order requires setting two price points that may be the same or different. While the stop price may be reached, there’s always a risk that the market price will not reach the limit price so the limit order may never be executed. This type of order may be more resulting due to a price guarantee if an asset is highly volatile.

To get more information on how to use these types of orders see our How to Trade on Cryptology guide or start trading on Cryptology right now!

Glossary

A market price is a request to buy or sell an asset at the best price available.

A buy order is an order to buy an asset.

A limit price is a price specified by a trader when opening a limit or stop-limit order.

A sell order is an order to sell an asset.

A stop price is a price in a stop-limit order that triggers the creation of a limit order.

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