Understanding the Different Types of Orders and How to Use Them - Reading time: about 5 minutes
Whether you’re trading equities on the Nasdaq or building up your HODL position on ProBit Global, orders play a critical role in a trader’s entry and exit following careful observation of market trends.
This can be done by conducting a fundamental analysis which will cover metrics such as tokenomics, team structure, viable product-market fit, and other key ingredients that can be a determinant of future financial success for both the asset and its investors.
Another widely used strategy is technical analysis, which incorporates various tools including charts and indicators aimed at predicting the future trajectory of an asset which attempt to account for past and present market cycles.
Once you’ve completed a thorough analysis, it is always prudent to proceed with a high modicum of financial responsibility due to the unforgiving volatility of the crypto space.
To put it simply, never risk more than you can lose.
Once you’re ready to get started, you will want to start off by placing an order to start building or augmenting your portfolio with the asset in question.
There are 3 primary types of orders that you will want to familiarize yourself with.
The first, and most straightforward type of order is the market order. As suggested by its name, market orders are simply orders that are designed to fill at the current market price.
This makes it particularly useful for a beginner who wants to make a quick entry and start HODLing as you can simply click and watch as your trade gets executed at the last traded price.
Limit orders are the main way traders buy and sell the various cryptocurrencies listed on ProBit Global.
Essentially, utilizing limit orders allows a trader to place a ceiling or floor price depending on whether the particular order is a bid or an ask. Limit orders can be seen as the backbone of a trader’s arsenal, allowing them to diversify their trading strategies while also attempting to account for future market movements to potentially execute a trade at an optimum price point.
By configuring a limit order at a specific price point, the trader benefits from the versatility of being able to leave an order unattended until it is successfully filled.
However, limit orders are characterized by higher risk due to the likelihood of the specified limit price failing to trigger.
What are the different types of Limit Orders?
Limit orders can also be further configured according to time in force, referring to the specific guidelines that determine how, when, and even what portion of an order is filled.
A good-til-cancelled (GTC) order will execute at a specified price and remain open until filled or closed. This is the standard order option used to trade on ProBit Global.
An immediate or cancel order (IOC) is an order at a specified price with the aim of getting the entire or even a portion of the trade filled immediately. In the case of a partially filled order, the remaining portion is immediately cancelled.
A fill or kill (FOK) order is used by traders to lock in a potentially favorable price point while ensuring that the entire order is filled in a single trade.
Limit orders can also be used for alogtrading using ProBit Global API. Algotrading enables traders to set up automated and even recurring trading patterns with an emphasis on securing residual, automated gains.
Best of all, some algotrading features include a feature called paper trading, essentially letting you familiarize yourself with an exchange orderbook and trading mechanics using a simulated balance.
Think of it as a risk-free trial before diving into the deep end.
How do You Place a Limit Order on ProBit Global?
2) In the search bar, type in the token name or symbol. The current price will be displayed as Last Traded Price.
3) In the Buy or Sell sections under Limit, enter your desired buying or selling quantity.
Clicking on one of the prices in the orderbook on either the buy or sell side will automatically apply that particular price.
Clicking on the % bar will automatically apply X% of your holdings towards a trade.
4) Once the desired price is set, press Buy or SELL. Try adjusting the order price closer to the last traded price if your order remains unfilled.
While stop orders are not yet supported on ProBit Global, they are commonly used by traders to essentially balance out potential profits and losses. Some of the more commonly used stop orders include the stop order, the stop limit order, and the trailing stop order.
A trader placing a stop order would configure a stop price that would essentially convert it to a standard market order which would fill at the next available market rate. A buy stop can mark an entry point in anticipation of an extended rally while a sell stop, also referred to as a stop-loss, can be used as a stopgap to prevent and shield the trader from compounding losses.
Stop orders can be particularly relevant in the world of crypto trading as it is specifically used by traders who deal with high levels of volatility and trade around the clock. However, stop orders are also more susceptible to executing at a price other than specified in the event of a sudden market swing after triggering the stop.
What’s the difference between limit and stop orders?
The primary difference between limit and stop orders is that limit orders will fill automatically when the price is hit while spot orders are converted into a market order to fill at the next available price.
Additionally while limit orders are widely visible across all market participants, stop orders essentially remain hidden until triggered, increasing the chance of a successfully executed trade.
A stop-limit essentially provides a wider safety net for traders with an additional condition that must be triggered before an order goes through. A trader will set up a stop price that initially places a market buy, but the order will only go through when the specified limit price or better is reached.
The trailing stop is an order that is built to lock in optimum profits while simultaneously reducing the risk of compounding losses. It is essentially a risk/reward compromise that can be tailored according to the trader’s overall risk appetite and the current direction of the market.
The trailing amount, which can be set to a certain percentage or amount above/below the market price, will essentially set up an anchor for the trader, after which it will effectively trail the market according to its upward or downward swings.
The main advantage of this approach is that a trailing amount can potentially mitigate compounding risk during a downturn and increase the chances of walking away with at least a portion of their hard-earned gains.
The trailing amount can also be adjusted to widen or tighten the anchor’s range based on the trader’s desired range and risk appetite.