Different Order Types

In today’s article, we’ll discuss the five different order types that pertain to the world of trading.

1. Market Order

A market order is when you sell or trade a stock at the market’s price. The idea behind a market order is that the investor has no control over the amount paid for the purchase or sale that he will be making. Rather the price is decided and set by the market. A market order can often be risky due to a fast-moving market. The reason behind this is that if a stock is popular and is traded excessively, the trade orders that are done before yours can affect the price you end up paying.

2. Limit Order

The second type of order we’ll be discussing is a limit order. This type of order prevents investors from selling a stock or trading at a price they don’t want. Hence the name Limit Order. The order will not be executed if the market price differs from the limit order price. A limit order is sometimes known as a buy limit or sell limit order.

Let’s learn the difference between a buy-limit order and a sell-limit order. The buyer specifies the amount of his limit order and will not pay more than that amount per share. In contrast, a sell limit order is used by a seller. This order specifies that the seller will not sell a share for less than $x per share, where $x is the seller’s limit order.

3. Stop Order

This order’s goal is to limit the losses of investors. It protects the investor when it sells a stock only when it reaches a specified price. A stop order is typically associated with a long position, although it can also be used with a short position. It will be purchased if the stock moves over the stop order price.

4. Stop Limit order

A stop-limit order combines a stop order and a limit order. This order requires the specification of two price points. The stop price and the limit price. When the stock reaches the stop price, the order is turned into a limit order. In contrast to a stop order, a stop-limit order guarantees a price limit. On the other hand, a stop order assures order execution but not at the stop order price.

5. Trailing Stop Order

A trailing stop order shares similarities with a stop order. On the other hand, a trailing stop order is based on the percentage change in market price rather than a set target price. A trailing stop is an adaptable and more flexible option than a fixed stop-loss order. It automatically follows the direction of the stock’s price and does not need to be manually reset.

6. Instant Order

An instant order can be used when you instantly want to spend x amount of USD to buy bitcoin. The order will find sellers in the order book and make the proper trade. The number of coins they offer is not relevant. This order can also be used to sell. The trader needs to specify the amount of bitcoin he wants to sell, and the order will be completed using the current market price.

Closing Thoughts:

It’s essential to be familiar with the order types if you want to invest in cryptocurrencies efficiently. You’ll find it simpler to explore all the order options that exchanges provide if you are familiar with these basics.

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