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Common Order Types for Cryptocurrency Trading

Trading

There are four common types of orders for trading. They are market order, limit order, stop order and stop limit order.

 

Market Order

A market order means to buy or sell an asset at the market price. Market price is determined as the best available price for the asset at the time the order is placed. You cannot place restrictions on the execution of a market order. Because prices change, the total and fee are estimated instead of true values.

 

Limit Order

A limit order to buy is at the limit or lower price that a trader has decided to buy. A limit order to sell would be at the limit or higher price that a trader has decided to buy. When you execute a limit order an amount of funds is reserved in your account. This does not guarantee that the order will be executed. Limit orders are shown in the order book.

 

Stop Order

A stop order means to execute a trade at a specific price. This differs from the limit order because once the stop price is reached, a stop order turns into a market order. Stop orders do not reserve funds and do not appear in order books before they are activated.

 

Stop Limit Order

A stop limit order means a limit order is created at a specific price. Once the stop price is reached, it turns into a limit order. This requires a stop price and a limit price to be specified. Stop limit orders do not reserve funds and do not appear in order books before they are activated.

 

Conclusion

Make sure you understand how these four orders work before you begin trading so that you know how your assets and investments will be treated as the market fluctuations occur.

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