If cryptocurrency trading is a relatively new concept for you, different types of cryptocurrency orders might intimidate you at first.
In this article, we will briefly cover some of the most popular types of cryptocurrency orders which are used by crypto traders daily.
Market orders are the most straightforward type of orders in the crypto market. Whenever you execute a market order, you are telling you are broker to buy the mentioned cryptocurrency at the best price available in the market at that time.
For example, if you place a market order for 1 BTC, your broker will take your order and will fulfill it with the best Bitcoin market price available at that time.
Market orders are used by cryptocurrency traders who are looking to buy a cryptocurrency quickly without worrying about paying a small premium for the fast service.
However, keep in mind that market orders are always a bit costly, meaning that you’ll buy at a higher price, and sell the crypto at a lower price if you try to immediately sell it back.
Stop Loss Order
With a stop-loss order, you instruct your broker to buy or sell a specific cryptocurrency when it reaches a price point specified to you in the stop-loss order. Stop loss orders get activated when the specified price is reached, and is executed by the broker at the price mentioned by you (if the market reaches that price).
For example, If you want to buy 1 Bitcoin at $20,000, you’ll have to place a stop loss order (a buy order) to buy BTC when its price hits $20,000. Once the price of BTC reaches $20,000 in the future, your stop-loss order will become active and will be executed by your broker.
Stop-loss orders are mostly set to sell by crypto investors who want to exit trades and sell their cryptocurrency to stop further loss when the price of an asset drops to a certain level.
A stop-loss order may never get executed if the market doesn’t reach suitable conditions.
Limit orders contain instructions to buy/ sell a cryptocurrency at a specified price point. The key difference between a stop loss order and a limit order is that the latter remains open until the market reaches the set price.
For example, If you want to buy 1 Bitcoin when it reaches $20,000. You’ll have to place a limit buy order for 1 Bitcoin at $20,000. Whenever the market reaches your set price, the order will be executed.
On the other hand, if you’ve bought 1 Bitcoin at $20,000 and want to make a $2000 profit on it, you’ll have to set a limit sell order for 1 Bitcoin at $22,000. Your order will be fulfilled when the market reaches the set price.
Trailing Stop Order
A trailing stop order is also considered a type of stop loss order. This order traces the current price of the crypto you’re interested in and adjusts itself automatically. It adjusts your position in the market according to the price fluctuations of your cryptocurrency.
For example, if you expect the current bullish market of Bitcoin to start reversing soon, you might set a stop-sell order at $48,000 when the current price of BTC has risen to $49,000.
However, if instead of retreating to $48,000, the price of Bitcoin goes up to $50,000, you’ll miss on a handsome amount of profit. If you set a trailing stop order instead of a stop sell order, it’ll adjust itself with the market trend to help you get the most out of your trade.
For example, when the Bitcoin’s price goes to $50,000 without first going to $48,000, your trailing stop order will automatically adjust itself, and will sell your Bitcoin at $50,000 if the price trend tries to reverse.