The Most Common Misconception about Limit Orders

There’s a common misconception about how a limit order is executed on SnapEx. Unlike other crypto trading platforms, SnapEx uses a unique metric to display the fairest and most accurate spot price — the K-Line.

The K-Line is a weighted average of prices pulled from four large cryptocurrency exchanges. It is intended to help traders make buy or sell orders at the most optimum prices based on the latest market buying and selling demands. The K-Line effectively reduces the platform spread and minimises slippages.

What is a limit order (and how does it work)

A limit order is an order placed to buy or sell or buy a certain amount of cryptocurrency at a specific price. The order will be pending until the spot price reaches the price that the limit order was set.

If you want to buy (long) BTC at $8,500 when the current market price is $8,600, you can place a limit order that won’t be filled unless the price you set becomes available. When that happens, your buy (long) order will be filled at $8,500 or lower.

The same applies for sell limit orders. If you want to sell (short) BTC at $8,700 when the market price is $8,600, you can place a limit order that will be filled once the price you set becomes available.

When placing a buy or sell limit orders, it’s important to note that:

• A Buy/Long limit order is based on the Ask price. The buy limit order will only be executed when the asking price is at or below the limit price specified in the order.
• A Sell/Short limit order is based on the Bid price. The sell limit order will only be executed when the asking price is at or above the limit price specified in the order.
• Bid price and Ask price are never the same, as it represents the different prices that buyers (long) and sellers (short) are willing to trade.
• Limit orders will be executed based on Bid or Ask price, not the K-line.

Buy Limit Order (Example):

A trader is expecting the price of BTC to temporarily pull back then increase and wants to go long. He places a limit order (2) to Buy/Long BTC at $8,220.50 with a margin of $100 at 10x leverage. The K-line price (1) for BTC at the moment the limit order was placed is $8,325.47. Once the Ask price (3) reaches $8,220.50, the buy limit order will be executed.

Note: Buy limit orders will not be executed even when the Bid price reaches $8,220.50. It will only be executed when the Ask price reaches $8,220.50.

Sell Limit Order (Example):

Another trader instead foresees the price of BTC will go bearish in the short term and may decrease from the current market price of $8,325 to $8,100. He places a limit order (2) to Sell/Short BTC at $8,240.90 with a margin of $100 at 10x leverage. The K-line price (1) for BTC at the moment the limit order was placed is $8,325.21. Once the Bid price (3) reaches $8,240.90, the sell limit order will be executed.

Note: Sell limit orders will not be executed even when the Ask price reaches $8,240.90. It will only be executed when the Bid price reaches $8,240.90.

Limit orders are incredibly useful to place orders in advance based on your analysis of the movement that a cryptocurrency price will make. It helps traders automate their orders and perform better trade management.