Crypto Investing
2 Dec 2021

Different Types of Trade Orders in Cryptocurrency

Deepan Datta

The number of cryptocurrency exchanges has increased dramatically over the previous decade, and they are now the major participants in the bitcoin industry. Customers would never have access to quick and reliable means to trade one cryptocurrency for another if the exchanges were not in place.

Cryptocurrency exchanges now together perform nearly $50 billion in deals every single day. Millions of new traders and investors have flooded into the trading market in recent years as a result of an explosion in the trading industry.

It is critical for all investors to be familiar with the fundamental trading order types, irrespective of their degree of expertise. Market, limit, and stop-loss orders are the three trading fundamentals that may be used to purchase or sell virtually any stock or cryptocurrency. 

If you’re an investor in the relatively new crypto field, wouldn’t you like to know how crypto order types work? This will give you a better perspective before you invest in a sale, allowing you to make better decisions, especially considering how volatile the market is. 

Order Types for Crypto Trading

The three different types of trade orders are given below:

  1. Market Orders
  2. Limit Orders
  3. Stop Orders

Different types of trade order

Market Orders

Market orders buy or sell assets at the market price. They are determined and assumed to be the best available price for any asset when placing the order. There can’t be any restrictions placed on a market order sale. If you’re working on an online platform, clicking on the buy/sell button will immediately execute the order. 

Most traders use market orders whenever they want to sell or buy securities immediately. Reasons include either cutting the losses or not missing out on potentially profitable moves. Market orders more or less guarantee that traders enter and exit positions as soon as possible. These kinds of orders are the best for well-established cryptocurrencies sold or bought at a rate close to the desired value.

An example of a market order is: I want to sell 0.75 Bitcoin (BTC) right now or ASAP. You’re willing to sell it at a pre-set price, with no negotiations.

Limit Orders

Limit order meaning is a type of order that buys or sells assets at a specific price (or better). Most buy limit orders are transacted at the limit or lower, while sell orders are mostly executed at a higher rate. Limit orders differ from money orders only if the market price reaches that limit threshold. While they don’t guarantee if an order is fulfilled, they are useful because they ensure you don’t have to pay more or receive less than the specific set price you’ve capped.

In cryptocurrency, limit orders are a useful tool mainly owing to the volatility of the market. If you’re not rushing or actively trading, these orders have their own benefits. For example, if you’d like to buy a certain currency when it falls to $100 USD, the order executes ONLY if that criteria is satisfied, otherwise, it won’t. 

Ex: Suppose the current price of one Bitcoin is ₹50,00,000. If you wish to purchase Bitcoin at ₹45,00,000, you need to place a limit order at ₹45,00,000. When the price of BTC falls below or to ₹45,00,000, your order will get executed. Here is where you can convert BTC to INR at the best rate.

Stop Orders

Stop orders are another extensive type of order that’s found in the crypto market, and it’s a mechanism that smartly locks in profits of any trade. This type of an order is made to limit any losses in markets that have a predefined entry or exit price. Once the stop price is reached, the stop order automatically converts into a market order. 

For example, an order is placed to sell 1 BTC at ₹45,00,000 (limit price) in the order book if the price of Bitcoin reaches or crosses ₹50,00,000 (stop price).

Buy-Stop Limit

Stop-limit orders mix features of both limit and stop orders. This type of an order gives traders more control over the trade execution, even if there’s no guarantee of the same.

Stop-limit orders require traders to set a stop price (starting a target price for trade), a limit price (end of a target price of trade) and a timeframe for the execution. Once the asset reaches the required stop price, the limit order then kicks in and executes the order when the price is at or above the specified limit price. Buy Bitcoin at the best rate. 

Sell-Stop Limit

This is the opposite of the buy stop-limit order. You’d want to sell an asset after it moves below a particular level to minimize any risks involved in the trade. Sell stop-limit orders are generally placed below the market price at the time of the order.

Stop-Loss orders

This type of order can instruct trading platforms or brokers to sell assets if their price falls below a particular amount. This can help safeguard against any unexpected losses. You can also program a sale of a cryptocurrency’s stock if it falls in value from the original price you bought it at, helping you cut your losses.

Stop-loss limit

Generally, the broker or platform automatically sells your asset once it reaches a specified level with the regular stop-loss order. With a stop-loss limit, the system automatically converts the order to sell when the specified stop price is triggered but will only sell at the limit price that you specified. So even if the price drops further, you’re not going to suffer as you’d set a limit for its sale price.

Trailing Stop-Order

This is a form of a regular stop order. Here, you set the trailing amount as a particular percentage of how much you can bear to lose. This is an order that can be placed at a definite amount away from the current market price. It is also set below the current market price to sell and above the current price for buying.

For example, suppose you purchase some cryptocurrency for ₹500 and place a trailing stop-order at a 5% discount to reduce your losses if the price falls rather than rising. If the price of bitcoin falls to ₹475 in this situation, your cryptocurrency trading platform will place a market sell order.

However, suppose your cryptocurrency suddenly surges to ₹800. If the market reverses course and falls by 5% at this moment, you will be out of the trade at ₹760 instead of ₹475. If you had used a conventional stop-loss order instead of a trailing-stop order, the algorithm would have terminated the trade when it reached ₹475.

FAQs on Order Types on Crypto Trading

What type of orders can be submitted for crypto orders?

There are several orders that can be submitted for crypto. The most common ones include Market Orders, Limit Orders, and Trailing-Stop Orders, among others.

What are orders in Cryptocurrency?

A trade order in crypto is an agreement to purchase or sell Bitcoin at a specified price or budget range. A trader’s toolkit is made up of several trade order kinds. A market order is an immediate buy or sale of a cryptocurrency at the best price available at that time.

Trading fees:

The accompanying trading expenses should be fully understood before engaging in any trading activity, whether through a broker or an internet brokerage platform. It is vital to read the fine print to ensure that you are fully aware of any related trading fees. Each brokerage and a cryptocurrency exchange have its own set of rules, and fees will vary depending on the broker, trading platform, and even your monthly trading volume. For example, CoinSwitch provides crypto trading services for free, while most other exchanges charge a certain amount of fees.

Interested to trade in cryptocurrencies? Download the CoinSwitch Kuber App and start your investing journey starting at ₹100.

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

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Deepan Datta

Content Writer

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