Know Your Order Types In Crypto Investing

Introduction

The act of betting on how the price of a cryptocurrency will change through a contract for difference (CFD) trading account or buying and selling the underlying coins through an exchange is known as cryptocurrency trading. CFD trading is a type of derivative that allows you to bet on price changes in coins without having to own the underlying currencies. The Crypto market is one of the trending markets around the world now, due to how profitable some traders have found it to be. These traders are either trading for a short or long time and there are lots of trading platforms available in the market for them.

It is crucial to becoming familiar with the exchange order types that are available in order to assist your trading cause before you begin making investments in cryptocurrencies. When buying and selling cryptocurrency using Crypto Exchange platforms, investors have access to a variety of investment terms, which are reflected by these Order Types.

Below is some information regarding the various classifications of the Orders.

Limit Order

A limit order is a form of exchange order that allows traders to purchase a cryptocurrency at a definite or lower price. This limit order will only execute if the limit or a lower price is met. This criterion gives dealers greater control over the prices at which they conduct business. A buy limit order guarantees the investor or trader will not pay more than the set price. Although the price is guaranteed, order fulfillment is not; these orders will not be fulfilled until the price of the cryptocurrency fulfills the order conditions.

The Bulleted points below show the advantages of Limit Order.

  • Investors have opportunities to make trades when the price is right.
  • Traders or investors also have all the time they need to target the least available price.
  • Removes the stress of the actual entry part of a trade.
  • The investor can enter while not watching the market if the price falls within the range of the limit order.

Market Order

The market order is the most basic and straightforward type of trading order. This is true because the traders use the market price while placing orders. A market order is instant, meaning the trade is filled immediately after the trader or investor places the order. This comes with both advantages and disadvantages. The short- traders know their fate immediately after they make trades, they won’t have the opportunity to study the direction of the market unlike Limit Order where they can target a much lower price,

The disadvantage of placing a market order on an exchange is that you agree to the exchange right to fill your order at the highest price available at the time. This imposes the restriction that traders who accept higher prices have their market orders filled before others who are more price-sensitive. Market orders, on the other hand, are filled first by default since traders who place them have agreed to the best possible price for a given item.

Take Profit Order

A Take Profit Order is a form of limit order that specifies the exact price at which an open position should be closed in order to realize a profit. This kind of order and limit orders combine in most cases, to results. The take-profit order will not execute until the price of the security reaches the maximum price before the time programmed for the order to expire.

To handle open positions, most traders employ take-profit orders in conjunction with stop-loss orders. If the trade climbs to the take-profit level, the order will be filled while the Stop Loss Order help to prevent losing beyond the specified limit.

Stop Loss Order

A trade order that is made to buy or sell a certain cryptocurrency at a specific price to prevent further losses is referred to as a stop-loss order in cryptocurrency investment. The stop-loss order’s goal is to prevent the investor from incurring losses that are greater than the limit that was stated. 

For example, if a trader or investor places a stop-loss order at a price that is 10 percent lower than the buy limit, the order will limit the amount of money that they can lose to 10 percent. This is by far the most secure way of limiting your downside risk while actively trading the digital currency market.

Fill or Kill

A fill or kill order is a contractual order that demands a purchase to be accomplished at a certain price. If any of the conditions fail, the order would be canceled (killed) right away. Most of the time, traders use this type of order to buy a lot of cryptos at a price and time that have already been set.

When making high-volume trades, even a small change in price or amount can have a big effect on how well the trade goes and how much money it makes in the end. Because of this, orders filling or killing are considered to be extreme.

Good Til Canceled

A trader or investor can place a market order in the crypto market to buy or sell a crypto asset. This order stays active in the marketplace until it is either filled or canceled by the trader. Orders like these are referred to as Good Till Canceled. 

The benefit of using a so-called GTC order is that you don’t need to supervise your open orders and as long as you have activated this feature your order will not be canceled by itself, it is your job to control that part.

How Profitable is Crypto Trading

One of the major questions on the lips of prospective Crypto traders is how profitable is the market. Many want answers to the question because they intend to profit from their investments. Though the answer to such a question may not be straightforward, the probability of someone getting some good profits out of crypto trading is high. 

Likewise, there is a possibility that one can lose all the invested funds. This is why it is very important that one learns the rudiment before starting an investment. As mentioned before, the most effective way to stay profitable while taking on occasional losses is to use a stop-loss order with your strategy. This will secure your downside risk in the event of a quick market collapse or a drop in prices, even when you are not sitting by your trading platform or exchange interface.

Conclusion

Finally, learning how to use the trading orders is one of the many pieces of training that an individual is required to go through before making any investments in the cryptocurrency market. It is common knowledge that the execution of these instructions dictates the manner in which investments are purchased and sold on the exchange platforms. This guide was produced with the intention of assisting investors in understanding the significance of these trading orders as well as the most effective ways to benefit from them.

Sources:

https://tradingbrowser.com/crypto-exchanges-with-stop-loss/

https://www.investor.gov/introduction-investing/investing-basics/glossary/fill-or-kill-order

https://www.schwab.com/learn/story/3-order-types-market-limit-and-stop-orders

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CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com

Rene Peters

Rene Peters

Rene Peters is editor-in-chief of CaptainAltcoin and is responsible for editorial planning and business development. After his training as an accountant, he studied diplomacy and economics and held various positions in one of the management consultancies and in couple of digital marketing agencies. He is particularly interested in the long-term implications of blockchain technology for politics, society and the economy.

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