Understanding Different Order Types

It is common knowledge that trading on the crypto market can be profitable and, at the same time, result in sharp losses. What differentiates a newbie from a professional crypto trader is a keen knowledge of existing risk-limiting techniques.

Beyond the threshold of buying and selling, it’s essential to understand the concept of trade executions and each market order type (Market, Limit, Stop and their subtypes). This guide will therefore highlight the most popular types and subtypes of crypto trades.

Market Order

This involves placing an order with a crypto exchange that, in turn, fills it at the current market price. While it is the type most traders know, its pitfall lies in its simplicity: it doesn’t really provide the timeframe in which the order should be completed, and there is no assurance that the order will be executed promptly.

In some cases, factors such as low liquidity may affect the execution of trades, which may potentially affect the end results of the trade. However, due to the high liquidity feature of the LBank crypto exchange, most of these transactions usually take place in seconds.

Some variants of market orders include the MOC (Market On Close), MOO (Market On Opening), MIT (Market If Touched), etc.

Limit Order

A limit order is used with the intention that a crypto asset is purchased or sold only when the market price hits a predetermined target point.

While this order type is pretty much safer than the market order, crypto market conditions and the chosen limit price can well result in the order not getting filed. Furthermore, with thousands of other users trading the same asset at any point in time, one may be beaten to the punch.

For example, if you place a limit to sell Ethereum for $2,200, your order will be filled only at $2,200 or a higher price. Hence, depending on the price fluctuations in the market, limits may get unfilled if the set price is not triggered.

Stop Order

Short for ‘stop loss,’ this trading strategy is used to place a limit against a loss on either a buy or sell order as well as to enter into a trade. When placing a buy stop, the traders are basically telling the exchange platform to take action when a price above the current one is reached. Likewise, when putting a sell stop, a selling price will be set below the current price.

For example, the bitcoin market price is $2,897, and you place a buy-stop order with a price of $2,892. Your stop is converted to a regular market when the market price reaches $2,892. A stop order is activated only when the market trades at the stop price or passes the price.

Stop limit, stop close, and other variants are examples of more advanced tools.

Stop limit requires the designation of two prices. One of these is decided in the same way as the basic stop order. Stop close takes the form of a set limit. When the market price aligns with the former, the latter becomes invalid.

OCO (One Cancels The Other or Order Cancels Order)

A dual-specification, “the one cancels the other,” commands the floor trader to fill one or the other of two orders. When the market allows for one of these two to be executed, the transaction is complete, and the second order is then canceled.

Fill or Kill (FOK) Orders

These are placed for full execution or no execution. These trade orders do not allow any partial executions. If the execution is not done, they become null.

Good Till Canceled (GTC) Orders

These orders remain active until they are executed. But most crypto exchanges have a specified time, after which they are canceled automatically.

Wrapping Up

Understanding different trade orders is an effective way to navigate the highly volatile crypto market. While this list is pretty comprehensive, these are just a few of the many order types in the crypto market.

Disclaimer: The opinions expressed in this blog are solely those of the writer and not of this platform.