Summary

When trading stocks or digital currencies, traders interact with the market by placing orders:

• A market orderis an order to buy or sell immediately (at the current market price).

• A limit order is an instruction that waits for the price to reach a limit or expected value before executing the order

Orders are basically divided into the above two types. Of course, there are some different variations of the two types of orders with different functions, depending on the transaction method. Curious? Read on to learn more.

Introduction

After successfully registering on the trading platform, do you want to know what the various buttons are? What does it do? Or maybe you've rewatched Wall Street and want to learn more about how the stock market works.

In the following, we will conduct an in-depth analysis of "orders", that is, the asset purchase and sale instructions you send to the trading platform. You will learn that there are two main types of orders: Limit orders and Market orders. However, this only describes the various commands from an attribute perspective.  

See the analysis below for details.

Comparison of market orders and limit orders

Market orders refer to orders that are planned to be executed immediately. Basically, the implication of this kind of order is to execute x at the current price. Suppose you want to buy 3 Bitcoins through the Binance platform. At this time, the transaction price of Bitcoin is US$15,000. If you are willing to pay $45,000 to buy these tokens and don't want to wait for the price to drop before taking action, you can directly place a buy market order.

You must be wondering, who is the seller of the currency? We need to look at the order book to find out. Trading platforms keep a large number of limit orders in their order books that are not executed immediately. This is like telling you, When the price is y, do x.

In this example, another user may have issued an order in advance, instructing the trading platform to sell 3 BTC when the unit price reaches $15,000. Therefore, after a market order is posted, the trading platform matches it with a limit order in the order book.

In fact, you did not create a new order, but filled the existing order, removing it from the order book. After absorbing the liquidity of the trading platform, you become the taker. On the contrary, the seller user has increased liquidity before and belongs to the pending order party. Generally speaking, the placing order increases the liquidity of the trading platform, so the transaction fee is lower.

For an in-depth understanding of the relationship between the two groups, please read "Detailed Explanation of Placers and Takers in the Market". The article provides an in-depth look at how the trading platform works.

Essential knowledge of market orders

The basic types of market orders can be divided into buy orders and sell orders. Users give instructions to the trading platform to trade at the best price. Please note that the best price offered is not necessarily the currently displayed market price, depending on the order book. Therefore, the price at which an order is filled may be slightly different.

Market orders are suitable for transactions completed immediately (or nearly immediately). The above is the general situation of market orders. Sliding spreads and trading platforms incur fees, which means the same trade may be cheaper using a limit order.

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Common order types

The simplest orders include market buy orders, market sell orders, and limit orders. price buy orders and limit sell orders. However, if you trade strictly on these order types, your trading experience will be limited. Instead, these order types give you the flexibility to take advantage of market conditions, whether pursuing a short-term or long-term trading strategy.

Stop-limit order

Stop-limit orders are an effective tool for limiting potential trading losses. This type of order can set stop and limit prices. If the trading price of BTC is $10,000, you can set the stop loss price of the stop-limit order to $9,900 and the limit price to $9,895. When the price drops from $10,000 to $9,900, place a limit order at $9,895.

However, the order will not be released until the stop price is reached. You still face the risk of continued low prices. In this case, if the price falls below $9,895, you will be defenseless and the order may not be filled.

One of two (OCO) orders

The "one of two" (OCO) order is a complex tool that can combine two Combined with conditional orders. After one of the orders is triggered, the other one is cancelled. Take Bitcoin with a unit price of $10,000 as an example. With an OCO order, you can buy when the price reaches $9,900 or sell when it rises to $11,000. After either of the two options is executed first, the second one will be automatically canceled.

What is the effective time?

Another important concept to understand when discussing orders is effective time. This is a parameter specified when opening a trade, indicating the conditions under which the trade will expire.

Good till canceled (GTC)

Good till canceled (GTC) is an instruction that states that a trade should remain open until filled or manually canceled . Generally speaking, this is the default option for digital currency trading platforms.  

In the stock market, a common alternative is to close the order at the end of the trading day. However, the digital currency market operates around the clock, so GTC is more popular.

Immediate execution or cancellation (IOC)

Immediate execution or cancellation (IOC) order stipulates that any part of the order that cannot be executed immediately Must cancel. Suppose you submit an order to buy 10 Bitcoins at a unit price of $10,000, but you can only buy 5 BTCs at this execution price. At this point, you will buy these 5 BTC and the remainder of the order will be closed.

Full or cancel (FOK)

Full or cancel (FOK) orders will be executed or offline (cancelled) immediately. If such an order instructs the trading platform to buy 10 Bitcoins at a price of $10,000, there will be no partial fulfillment of the IOC order. If the above order cannot be executed immediately at that price, the entire order will be cancelled.

Summary

Mastering order types is the key to successfully completing transactions. Whether you are limiting potential losses with stop-loss orders or planning for different outcomes simultaneously using OCO orders, it is crucial to understand the trading tools at your disposal.