Crypto Order Types and How To Use Them In Crypto Trading

You probably might be having a long day and starving, so why not just place an order to quench that hunger? Well, sorry to disappoint you; crypto orders are not McDonald’s.

However, to trade cryptos, you have to place an order. A crypto order is a specific instruction that enables traders to buy and sell cryptocurrencies at any desirable price. You decide what price to enter the market and close your position, and you do that by placing an order. Awesome, right?

This article will give you an overview of what a crypto order means and how to start trading with orders. Let’s get started!

As you may already know, different traders have unique trading strategies, and they enter the market at diverse price ranges. Entering and closing your position at the desired price is made possible by trade orders.

Simply put, a crypto order is an offer sent to an exchange to buy or sell an asset at a given price or price range. There are four types of orders but all four fall into two categories — an instant order and a pending order.

Yeah, you guessed right, an instant order is made immediately and at the current market price. The only example of this is the Market order. Conversely, a pending order takes place when certain conditions are met. Limit order, Stop order, and Stop-Loss order all fall under the pending order category.

Depending on the type of trade you want to execute, here are the four types of orders you can choose from.

Say you are a big Satoshi fan and only trade BTC. And now you want to buy 5 BTC as fast as possible. This means you want to buy 5 BTC at the best available price; after all, you’re a Satoshi geek. Trading at the best available market price is executed using the Market order.

A Market order executes trades instantaneously at the best market price. It is a basic order type and is the easiest. So, if you don’t have a target price in mind and want to buy any crypto asset right away, a Market order is perfect.

Now, things are getting a bit interesting. Wouldn’t it be great if you could buy and sell cryptos at a desirable price separate from the market price? Well, if you’re looking to become a better trader, you’d want to buy and sell at a favorable price, and you can do that with a Limit order.

A Limit order enables traders to buy at a price below the market price and sell above the market price — you basically buy and sell at a favorable price. A Buy limit allows you to buy below the market price; with a Sell limit, you sell above the market price.

When you hear the word “Stop,” the only thing that comes to mind is the red traffic light. But no, a Stop order doesn’t denote stopping a trade like you hit your car brakes; it’s way different.

You only use a Stop order when buying at a higher price or selling at a lower price. Sounds confusing? What it really means is, say you want to buy 5 BTC like the Satoshi Geek earlier, and the current price is $30k. Now your analysis shows that BTC will keep rising if it hits $30,500. You only need to open a Buy Stop order, and your trade will be triggered when BTC hits $30,500.

Similarly, if your analysis shows BTC will keep falling if it drops below $30k to $29,500. You can then place a Sell Stop order when BTC reaches $29,500. And voila, you’ve mastered the Stop order.

Okay, by now, you should be placing trades for fun, but we have yet to discuss how to minimize your losses. What’s the point of trading if you don’t make profits? A Stop Loss order should be your favorite if you always want to win.

A Stop Loss order closes your position to minimize potential losses. Say you’re still keen on buying 5 BTC, and BTC is worth $30,300. Then you place a limit order to buy at $30,100, hoping BTC will fall before rising again. Now you set up a Stop Loss at $30,000 incase BTC falls below your target price. That’s how Stop Loss works.

There’s another version of the Stop Loss order called Trailing Stop. A Trailing Stop order helps you lock in profits and minimize losses as the market moves. Say BTC in the example above rises from $30,300 to $30,500, and you set up a Trailing Stop order; the Stop Loss was initially set at $30,000 but will move to $30,400 since the price has increased. That’s how a Trailing Stop order works.

Crypto trading can be fun and very profitable, but it’s important to be wary of the risks involved. One pertinent factor that influences your performance as a trader is understanding how trading works, and knowing how to use crypto orders is one way to go. Understanding crypto orders gives you an edge in getting the best out of your strategies and helps you to minimize risks.