When trading cryptocurrencies or other assets, all orders on the exchange determine how the order or orders will be processed and when they are executed.
Understanding the types of orders is crucial if you want to become a reliable trader. Here are the types of orders you need to know.
Market Order
This type of order is often considered the simplest. Because the order is proper when you want to enter or exit a position, and liquidity is quickly abundant.
If you use a market order, you make a purchase or sale at the current price.
Limit Orders
If market orders can be executed immediately, limit orders are another story because this order is an order that will be processed when a specific price is reached.
Users can enter the target price they want to buy and sell at. When that price is reached, a new order is processed.
This type of order allows traders to set limits and control their risk.
Thus, traders are given the advantage of knowing their established price limit.
This will also make it easier for them as they don’t have to monitor the market to execute the trades they want constantly.
It should be noted that there is a possibility that the limit order will not be completed even when the market price reaches the limit price.
This can happen if multiple limit orders are set at a specific price, and in most cases, these will be filled on a “price-time priority.”
This means that orders are ranked first based on price, and orders with the same price are filled with the concept of first come first pick, or if you enter a limited order than others, your order will be processed.
Therefore, there is a possibility that even if the order price is met, there may be too many other orders ahead, and the price may change before your order is executed. This is why it is recommended to set the limit price slightly above (for ASK ) or below (for BID).
Stop Orders
Stop orders are similar to limit orders; limit orders are placed in the order book and can be seen by anyone, while stop orders are not even sent until the conditions are met.
A stop market order says, “If the price reaches X, immediately buy/sell.” This does not mean you will get price X, but when that price is reached, an order or orders will be immediately placed to buy at the current best price.
Or suppose a stop-limit order says, “If the price reaches X, place an order to buy/sell at Y.”
the benefit of this stop order is that you don’t need to monitor the market constantly even when you log out of your trading account; if your order is reached, this order will be automatically processed. So by using a stop order, your order will be executed automatically, just like you would a market order. The exchange will usually charge this stop order an additional fee.
Scaled Orders
Scaled orders use multiple limit orders to buy or sell incrementally. This can help minimize the impact of market fluctuations over time as well as reduce the effects caused by large orders.
Sometimes, a trader wants to make several smaller purchases at a different price range with a larger one at a fixed price. There are several reasons to do this, one of which is “dollar cost averaging.”
Another reason is not to reveal to the market that a large order is waiting for execution. This is done to minimize the effect of trading on the market.
Large orders can not only have a significant impact on the market by moving prices but can also have a psychological effect by influencing other traders.
To avoid this, a large buy or sell can be divided into, for example, ten small orders placed at different price levels. Mostly, this will look like a regular activity in the order book.
He shares the types of orders or orders you need to know before you start trading cryptocurrency.
Every order has advantages and disadvantages, so please be wise in determining the type of order you will do.
More News About Crypto : NEWS
Follow our Twitter : https://twitter.com/DinoDapps
