The way we invest is changing. Traditional financial and investment instruments are evolving with time, while new assets such as cryptocurrencies are offering a fresh set of opportunities. As these new-age assets keep attracting new traders, the crypto markets witness a large volume of trades worth millions every single day.
The crypto space is constantly growing as traders continue to ask for a variety of trading options and tools on crypto exchanges. Perhaps the most important one among This is order types that allow you better control over your investment choices and decisions.
Market orders and limit orders are two primary types of orders in crypto trading. A market order kick-starts the process of purchasing or selling an asset right away at whatever price the market has to offer at the current moment. On the other hand, limit orders are basically instructions to hold on to any kind of buying or selling until the specified price requirement is met.
A standard stock market transaction, to any person who knows about the market but doesn’t really have a sound understanding of it, is usually market orders. In these types of orders, a broker gets a security order that he further processes at the market price. Needless to mention, these are the most basic forms of transactions that essentially execute buy and sell orders.
Say an investor orders to buy some 100 odd shares of a company at the market price. Now that they have chosen to buy these shares at the current market price, the trade will not take long to get filled.
Market orders have better chances of getting trades executed, but remember that there’s no guarantee for this. Most stock market transactions rely on the availability of stocks, which can vary depending upon the order’s time, size as well as the liquidity of the stock.
The present priority guidelines determine the processing of orders. Hence, every market order could be subject to market fluctuations, resulting in a change in prices that could take place between when the broker gets the order to the time when the trade is finally executed.
In the case of large orders, this can be particularly important as they tend to take a longer time to be filled and may even influence the market. If the orders are remarkably large in volume, individual trades might even be suspended.
To make note of the fact that all market orders placed after the set trading hours are filled at the market price of the following trading day.
Placing market buy orders?
- By Total
Imagine that you have the ownership of 1,000 USDT and are going to place a market order for the pair BTC/USDT. In this case, if you want to execute a ‘Buy 100%’ order, it will be processed at the prevalent market price as per the total USDT in your kitty. However, how much BTC you will get in return would remain uncertain.
The total amount of the BTC transaction depends on the market price and the order quantity. The amount of BTC purchased, and the average price, can be checked prior to the transaction.
- By Amount
In another scenario where you own 100,000 USDT but the price of the pair BTC/USDT keeps changing and moves somewhere around 34,105 USDT. Here the crypto trading pattern, when you place a ‘Buy 100% order’ will generally be like this: once the order is placed, it will be matched by other sell orders to figure how much BTC you can get.
You can have better control over your personal crypto trading pattern with limit orders. You can even track your reading behavior, as limit orders allow you to choose a maximum acceptable purchase price amount before you put a purchase order through. At the same time, minimum acceptable sales prices can be checked from sales orders.
With limit orders, you have the satisfaction of knowing beforehand that the entry and exit points you choose in the market are more or less at par with the specified price. Limit orders can be of use when you’re trading a tricky stock like the ones that are very volatile or are thinly traded or those that come with a bigger bid-ask spread. Limit orders help you cap or set aside the amount you want to pay as an investor, thus preventing harder-to-digest losses.
Let’s look at an example, to understand how this works:
Let’s assume that an investor is concerned about buying a certain number of shares for a high price, as they believe that the same can be bought at a lower price. Hence, they opt for a limit order so that if the price falls to the investor’s speculated rate, they would automatically have the chosen shares in their portfolio. Needless to mention, this also means that if by the end of the day the price doesn’t dip as expected, the order will not be filled.
Limit Orders vs. Market Orders
When buying or selling a stock, as an investor, you have two broad options to execute the trade: at market or at limit. Market orders can be used to execute trades rapidly at the market price while with a limit order, you can cap the maximum or the minimum price at which you would choose to sell or purchase.
If you come to think about it, this is not very different from regular trades that you may be familiar with. Say for instance you want to buy a bike or an appliance or perhaps a car. You either take the price offered as written on the sticker, or you negotiate until the seller meets you at the rate you’re willing to pay.
A market order largely takes care of order execution, where the security’s price comes second and speed of fulfilling trade takes priority. Limit orders are more concerned with prices and if the price of a share/stock does not fall within the yardsticks of the order, no transaction takes place.