What Are Some Common Cryptocurrency Order Types?

Order types exist so that an individual who submits an order to purchase or sell assets retains some control over their order after it has entered the marketplace. Eventually, they exist so that a person who is buying or selling stocks, commodities, or currencies can insert a lot of other small instructions in a single simple instruction.

When trading crypto coins or other assets, all orders on an exchange platform fall into one of a multitude of types that decide how an order is processed and when it is executed – besides this, orders can be attributed special instructions that augment their parameters, usually aimed at controlling the timing of execution.

What is a Market Order?

A market order is basically the most fundamental form of order type and is simply an instruction to buy an asset at the best price currently available. This kind of order is the buyer basically saying, ‘I want this now at the best price out there.’ This guarantees the order will be executed, but it is not involved with its price. Mostly common among beginners, this type of order is usually considered the simplest, and it can be useful when you just want to enter or exit a position and liquidity is abundant.

​Users who are usually placing market orders are referred to as ‘takers’ because they are matched instantly and, therefore, take liquidity from the order book.

What is a Limit Order?

Another common order is the limit one. A limit order places a certain price that a trader wants to buy or sell at and is only carried out if the market attains that price.

​While market orders are executed immediately, limit orders are performed at a predefined price, which is usually better than the current market price. For instance, you consider Bitcoin (BTC) is going to plummet. Placing a limit order will enable you to set an execution price at, for instance, $500 below the current market price by placing an order to the order book.

If Bitcoin dips at that price, the limit order sitting in the book will be carried out, and the trade will be concluded at your wanted price. This process enables traders to set limits and control their risks. Therefore, traders are afforded the luxury of knowing their price limits are set and will not be forced to continually watch the market to carry out the trades they want.

What are Time-in-Force Instructions?

What can modify the limit orders is the time-in-force instructions. These instructions are placing time constraints on when they are carried out or canceled. This enhances the range of control a trader has and takes away the chance of forgetting about an older order that they do not want anymore.

​In case a trader has an old order on the books from weeks ago that is not desirable anymore, based upon current conditions. If left unchecked, that order could end up being executed and be a pricey mistake for the individual that places it. To account for this, traders can tune the ‘time-in-force’ instructions on orders to limit how long they stay active without being carried out.

The most straightforward instruction is ‘good till canceled,’ which is basically saying, ‘Leave it on the books until it is executed or I cancel it.’ This is indeed the default for many trades, as it doesn’t give much instruction at all.

There are also ‘immediate-or-cancel’ orders, which are automatically canceled if they cannot be executed as soon as they are placed on the order book. In a similar way, the ‘fill-or-kill’ instruction will cancel the order if not fully filled by another order after it has been passed onto the book.

Finally, there’s the day order instruction. This cancels the order if it is not carried out by the end of the trading day. For even more flexibility, traders can use the ‘good-till-date/time’ instruction, which means an order will stay active until the time that’s been predetermined or filled is reached.

The Bottom Line

As you can imagine, by combining these various order types and instructions, traders can have massive control over how and when trades are carried out.

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