Accredited as the fundamental trading unit of the crypto and securities market, an order is simply an array of instructions used to buy and sell cryptocurrencies on a trading platform. From financial derivative markets to stock markets, bond markets to cryptocurrency exchanges, an order is a crucial element of any trade or transactions.
Before investing in the crypto market, understanding how different orders work helps in shielding funds from the market fluctuations. Through this NitroEx guide, we intend to throw light on the most prevalent crypto trading orders.
Market order
A buy or sell order immediately executed at the best available current market price is termed as a market order. Such orders are put to use when a trader prioritizes the order execution and wants to quickly jump in and out of a trade with the price they get.
For instance, let’s assume that you have to sell your old laptop. You quote the price, say $1000, with a motive to filter the interested buyers. The buyer who is ready to shell out a $1000 finally becomes the lucky owner of the laptop! Now let’s understand how this works while trading cryptocurrencies.
The method is quite simple. A cryptocurrency exchange platform enables buyers and sellers to list their best values. If both parties reach a consensus, the order is matched, validating trades and immediately executing the orders in the most transparent and efficient manner.
Limit order
With limit orders, you can buy or sell your assets at a specific price or even better. A sell limit order can only be executed at the exact limit price or higher. Similarly, a buy limit order is executed at the specific limit price or lower.
Let’s consider that the buyer interested in buying the laptop has a budget of $900. He would then wait until the price of the laptop is lowered to $900 or less or if another laptop is available at his desired price.
In crypto trading, a limit order is expressed as a scenario when a trade meets the pre-defined constraints set by the seller or buyer. In case of a bearish market, the limit order is used to restrict the losses while also automating the transactions.
Stop order
Depending on the price movements, a stop order enables traders to limit their losses from an open position or adding to the position. The limit price indicates the worst market value at which the order can be matched. On the other hand, the stop price illustrates the market price, if reached, would lead to the stimulation of the stop order. It is broadly classified into the following categories:
Stop-buy order
Stop-loss order
Stop-limit order
It is a type of conditional order that combines the features of limit order as well as a stop order, extending higher trading precision to the investor. While making investments with the stop-limit order, you have to set two prices- activation price and a limit price.
For instance, suppose you have to buy ETH at a value of $235. You wish to invest only if you see a positive price trend. So, you place a stop-limit order, fixating the activation price at $240 and a limit price at $245. When the Ethereum value reaches the $240 mark, the limit order will get activated and your ETH buy order will be executed for as long as the price remains below $245. In case the price shoots above the mark, the order will cease to execute. This way, traders can control when to safely enter or exit the market.
Iceberg order
An iceberg order is a large single order, divided automatically into smaller limit orders to hide the actual order quantity. Akin to an iceberg, the bulk stays hidden, while a very small portion of the order is visible on the crypto market. Nevertheless, with trade automation, you don’t have to manually enter the orders for execution.
Such orders are beneficial for institutional investors, who buy and sell large quantities of crypto assets without causing major price fluctuations in the market.
Conditional orders
One-sends-other (OSO), one-cancels-other (OCO), and one-cancels-all (OCA) are known as conditional orders.
Depending on the execution of the first order, the next or several other orders are either executed or cancelled automatically. These orders are remunerative and can be advantageous for traders looking to establish strategies for trading cryptocurrencies with optimum efficiency.
Margin order
When you trade cryptocurrencies, investing in larger amounts mostly results in bigger profits. However, not every trader has the capital to execute trades of large sums. This is where the crypto exchange steps in to aid. It helps in borrowing funds to place orders, encouraging traders to invest and earn profits in bullish trends. At last, traders are necessitated to return the borrowed amount inclusive of a predefined commission.
Fill or Kill (FOK) order
Fill or Kill (FOK) order is defined as an order type that must be immediately filled in its entirety, at a pre-determined crypto price or better, or it gets cancelled.
For instance, if the best NTX/USDT ask price is 0.008USDT and there is just 1 NTX coin being sold at this price. In that case, with a FOK buy order of 1 NTX at 0.008 USDT, the order will be executed. On the other hand, if you place a FOK buy order of 2 NTX at 0.008 UDST, your entire order will be cancelled immediately and will not execute at all.
Immediate or Cancel (IOC) order
IOC order requires a part or all of the order to be executed immediately, where any unfilled parts of the order get cancelled. Unlike FOK orders which must be filled immediately or else they are not executed, partial fills are accepted with IOC orders.
For instance, if the best NTX/USDT ask price is 0.008 USDT for 1 NTX coin and you wish to place an IOC buy order of 2 NTX at 0.008 USDT. In that case, IOC buy order would execute only 1 NTX and would cancel the remaining 1 NTX order.
Final Thoughts
Cryptocurrency trading is modelled on the lines of a traditional forex market, enabling traders to earn profits from variation in the market prices. At the heart of the crypto trading industry lies the different order types that shape the entire crypto transactions.
At NitroEx crypto exchange, we furnish advanced trading features to buy and sell cryptocurrencies at the lowest trade fees. With multiple order types including market orders, limit orders, and stop-limit orders, we have streamlined the trading process, making it rewarding and efficient. We ensure that our interface caters to the different needs of beginner and professional traders, promoting them to have full control over their transactions.
If you wish to know more about how to trade cryptocurrencies with different order types, reach out to us at support@nitroex.io
