Explore Different Types of Trading Orders

When participating in the financial market, understanding the different types of trading orders is extremely important. There are two basic types of orders that every investor should master:

• Order (Market order): This is an order to buy or sell immediately at the current market price.

• Order (Limit order): This is an order that can only be executed when the price reaches the level you have predetermined.

Each type of order has different variations to suit the specific trading strategy of each investor. Let's explore these types of orders in more detail!

Overview of Orders

You just opened an account on an exchange and are wondering about the meaning of the buttons? Or you just finished watching a movie about the stock market and want to understand better how it works?

In this article, we will thoroughly analyze the types of trading orders - tools that help you interact with the market to buy and sell assets effectively. As mentioned, there are two main types of orders: Limit Order and Market Order. However, that is just the simplest way of classification.

Let's explore deeper into other interesting aspects of the order.

Comparison of Market Order and Limit Order

A market order is an order that is executed immediately. Essentially, it can be understood as "please execute transaction X at the current price". For example, if you are using Gate and want to buy 3 BTC when the price is at 15,000 USD, you can place a market buy order to purchase for a total amount of 45,000 USD without waiting for the price to drop further.

So who will sell you that amount of cryptocurrency? The answer lies in the order book. This is where the exchange stores the list of limit orders - those orders that are not executed immediately. A limit order can be understood as "execute transaction X when the price reaches level Y".

In the example above, another trader may have placed an order to sell 3 BTC at a price of 15,000 USD/BTC earlier. When you place a market order, the exchange will automatically match your order with the available orders in the order book.

In fact, you do not create a new order but only "fill" an existing order and remove it from the order book. That's why you are called a "taker" ( who takes ), as you have taken away the liquidity from the exchange. The remaining trader is called a "maker" ( who creates ), as they have added liquidity to the market. Typically, makers will enjoy lower trading fees as they provide benefits to the exchange.

The relationship between maker and taker can be further explored in the article "What are Maker and Taker?". Read it if you want to gain a deeper understanding of how exchanges operate.

Key Points to Note About Market Orders

Basically, a market order is a buy or sell order that is executed immediately. You request the exchange to carry out the transaction at the best possible price. However, it is important to note that the best price is not always the displayed price - it depends on the order book, so you may end up executing the transaction at a slightly different price.

Market orders are suitable when you need to execute a trade immediately. However, you should consider the slippage fees and the execution of the trade, as it may make the trade more expensive compared to using limit orders.

Common Types of Orders

The simplest and most common orders include market buy orders, market sell orders, limit buy orders, and limit sell orders. If you are not familiar with these orders, you will find it difficult to trade. Conversely, mastering them can help you take full advantage of market opportunities, whether in short-term or long-term trading.

Limit stop order

A stop-limit order is a useful tool that helps limit risk in trading. This type of order allows you to set a stop price and a limit price. For example, if BTC is trading at 10,000 USD and you set a stop-limit order with a stop price of 9,900 USD and a limit price of 9,895 USD. When the price hits 9,900 USD, a limit order at 9,895 USD will be triggered.

Please note that the order can only be placed after the price hits the stop level. There is still a risk that the price may not recover, and in that case, you will not be protected if the price continues to drop below 9,895 USD.

OCO order (One-Cancels-the-Other)

The OCO order allows you to combine two conditional orders. When one order is triggered, the other order will be automatically canceled. For example, with BTC at 10,000 USD, you can use the OCO order to buy when the price drops to 9,900 USD or sell when the price rises to 11,000 USD. When either of the two conditions is met, the remaining order will be automatically canceled.

Validity period of order

Another important aspect of the order is the validity period. This is a parameter you set when opening the order, specifying the expiration conditions of that order.

Order is valid until canceled (GTC)

The GTC order will remain open until it is executed or manually canceled. This is usually the default setting on cryptocurrency exchanges.

In the traditional stock market, a popular option is to close the order at the end of the trading day. However, due to the cryptocurrency market operating 24/7, GTC orders are more common.

Immediate or Cancel Order (IOC)

The IOC order stipulates that any part of the order that is not executed immediately will be canceled. For example, if you place a buy order for 10 BTC at a price of 10,000 USD but can only buy 5 BTC at that price, you will buy 5 BTC and the remaining part of the order will be canceled.

Fill or Cancel Order (FOK)

The FOK order must be executed in full immediately; otherwise, it will be canceled. If your order requests to buy 10 BTC at a price of 10,000 USD, it will not be partially filled. If there are not enough 10 BTC available at that price immediately, the entire order will be canceled.

Conclusion

Mastering the different types of trading orders is a crucial factor for successful trading. Whether you want to use a stop order to limit risk or an OCO order to plan for various scenarios, understanding and knowing how to use the available trading tools is essential to enhance your investment effectiveness.