/ Trading 101

The Different Types of Orders and How to Place Them

When you enter crypto markets to place buys and sells, you'll find several types of orders that you can place. The three general order types are market orders, limit orders, and stop orders. Let’s break them all down to prepare you for your next trade.

Market Order

The simplest type of trade order is a market order, which is a buy or sell that happens at the current market price and is executed as soon as possible.

A market order is initiated easily by entering a buy or sell position on a trading platform. A trader may want to place an order to buy or sell 1 BTC, so a market order lets them buy or sell immediately at the listed price by filling an order from the platform’s order book.

Market-OrderMarket Buy Order from Quadency Dashboard

Pros & Cons: Trade execution is quick with market orders, plus you can trade at the current price and it works well for small orders. But you can’t specify a price for the buy. Also, because a market order fills an existing sell order, you are considered a “taker” of liquidity and the trading fee will be slightly higher than with limit orders.

Limit Order

A limit order is an order to buy or sell a crypto asset with a price limit attached. If you only want to buy BTC when it reaches $35,000, you can specify that with a limit order. Conversely, if you want to place a sell order when BTC reaches $60,000, a limit order is one way to do this.

To place a limit order with Quadency, simply choose your trading pair and determine the price where you want the trade to execute. Your buy or sell limit order will go through automatically when/if the desired price is reached.

Pros & Cons: The best part about limit orders is it gives traders the ability to choose at what price level the trade will happen. It’s also a good way to manage large buys, as you don’t want to pay too much for a buy or sell at too low a price. However, with limit orders the trade is not guaranteed to execute because the price level may not be reached.

Market-Order-vs-limitMarket vs Limit Order Summary

Stop Order

Traders use the stop order to buy or sell a digital asset once the price reaches a certain target. But unlike the limit order, a stop order only becomes visible in markets when the trade is activated by reaching the target price. Then it automatically places a market order which executes immediately at the current market price (not necessarily the target price).

There are two general types of stop orders. The stop loss and the stop limit:

  • A stop loss protects long positions by triggering a market sell order if the asset price falls below a specified level.
  • A stop limit is a type of stop loss but when the stop price is achieved, a limit order is triggered (not a market order) and executes at the limit price or better.
  • Both types of stop orders can help traders limit their losses.

Pros & Cons: Stop orders let traders enter or exit a buy or sell at a future stop price that they choose, helping them to manage their risk by limiting their losses. But because the stop order functions just like a market order, the exact price cannot be guaranteed (with a limit order, it hits the exact price or it doesn’t execute).

Conclusion

Trading in crypto markets involves many types of orders that help the trader manage their buys and sells. Each order type can be used to the trader’s advantage in certain situations, so learning the different kinds is essential crypto trader knowledge.

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Quadency is a cryptocurrency portfolio management platform that aggregates digital asset exchanges into one easy-to-use interface for traders and investors of all skill levels. Users access simplified automated bot strategies and a 360 portfolio view with a free account.

Disclaimer: The content of this article is for general market education and commentary and is not intended to serve as financial, investment, or any other type of advice.