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Knowing the different crypto order types is essential before you buy your first cryptocurrency investment.
Have you signed up to a crypto exchange or crypto broker? We know you are very excited to finally put in money and watch that crypto investment’s value shoot to the moon!
But, pause your excitement for a moment and take time to read this blog post. We promise that this is exactly the knowledge you need before going through with your first buy.
The topic for this blog post is about the different crypto order types.
5 Crypto Order Types
Market Order – Easiest Crypto Order Type
Market order is a crypto order that refers to the bid that an investor places to buy or sell a stock or crypto coin depending if the current market’s available price is ideal for them. It guarantees a purchase of a crypto coin or token. However, it does not assure investors of a specific price.
Simply put, a market order is the simple action of buying or selling a cryptocurrency at the best price. If an investor’s goal is quick trade execution, a market order is the best choice. Investors usually place this during active hours of the trading market.
Another term for market order is spot order. It is the simplest order type to implement and process quickly. Furthermore, market orders are subject to a ‘taker fee’ because you are taking liquidity from the order book.
In contrast, a limit order is the opposite of market order. There is a predetermined price at which you can buy or sell a cryptocurrency.
The investor has to indicate the amount or limit price they want to buy or sell. Most importantly, they have to indicate the price limits that they are willing to admit.
Limit orders work for people who don’t have time to monitor their screens 24/7. Investors set their favored price and wait until that order is triggered.
Cryptocurrency trends change a lot in a little span of time. So, if an investor foresees a change in market price or market trend, a stop order is useful. This is an order type that is set in motion when the specified price or stop price is met. There are two subtypes under the stop order.
This is a fusion of limit order and stop order. Stop order minimizes the risk. Traders use stop-limit orders to ensure their profits while minimizing their losses. The stop-limit order involves two processes. First, the order becomes a buy or sell order. Next, investors specify the high or low price limit that they will take when a sale is about to happen.
It helps manage a cryptocurrency portfolio. A stop-loss order has two price layers – stop price layer and loss layer. Investors who have lots of experience adjust the stop loss level depending on the market’s movement.
Can cryptocurrency make you rich? Read here.
Time in Force Order
This kind of crypto order comes with an expiry date. This is ideal for investors who observe important trading indicators such as moving averages. If they set up a specific time parameter for their crypto trade, they act consistent with crypto market sentiment and predictions.
There are three kinds of Time in Force Order.
Good ‘til canceled (GTC)
Most crypto trading platforms have this default option. Good ‘til canceled (GTC) means that a trade is left open unless the investor manually cancels it or it is executed already.
Immediate or cancel (IOC)
Any part of the order that isn’t filled or a partial fill is automatically canceled. With this kind of order, the investor allocates the minimal quantity needed for an immediate fill.
Fill or kill (FOC)
Whereas an immediate or cancel (IOC) order is only removed if a portion is not filled, the fill or kill cancels an order if not filled immediately.
Trailing stop order
A derivative of the stop order, it trails the price of the cryptocurrency that an investor is interested in. The trailing stop order moves the position with respect to changes in the crypto coin’s price. It helps investors secure their gains while minimizing their deficits.
Trailing stop order is more flexible than stop-loss order because it tracks prices automatically, ensures profit and lowers trade losses. Conversely, a stop order focuses on lessening your trade deficits and requires manual setting.
There are many factors that influence a market’s conditions. Demand and supply is a major influencing factor for cryptocurrency. Other factors such as the blockchain performance, competition among crypto companies and participant behaviors also have a part to play.
Now that you know the ways of controlling your order, you can make the most out of your investments and decide in a way that will increase your profits best.