In crypto trading, there are several main types of orders that traders use to buy and sell assets. Each type of order is designed for specific purposes: from simple purchases at the current price to complex risk management strategies. Here are the main types of orders and how they work:
1. Market Order
What it does: Buys or sells an asset at the current market price.
When used: When you need to quickly enter or exit a position.
Pros: Executes quickly.
Cons: No control over the execution price; slippage may occur.
Example: If bitcoin is priced at $68,000, you create a market order to buy — and receive it at a price close to $68,000.
2. Limit Order
What it does: Buys or sells an asset at a specified price or better.
When used: When you want to buy cheaper or sell higher than the current price.
Pros: Full control over the price.
Cons: The order may not be executed if the price does not reach the specified level.
Example: You set a limit order to buy BTC at $66,000. If the price falls to this level, the order will be executed.
3. Stop Order
(Sometimes called Stop-Loss or Stop-Market)
What it does: Activates when the price reaches a certain trigger (stop price) and turns into a market order.
When used: To limit losses or enter the market on a breakout.
Pros: Automatic protection against large losses.
Cons: May execute at an unfavorable price during sharp movements (slippage).
Example: You bought BTC at $68,000 and set a stop order to sell if it falls to $65,000.
4. Stop-Limit Order
What it does: When the stop price is reached, a limit order is created.
When used: When you want to protect against losses but do not want to sell at too low a price.
Pros: Control over both the activation price and the execution price.
Cons: The order may not be executed if the price skips the limit.
Example: Stop price — $65,000, limit — $64,500. If BTC falls to $65K, a limit order to sell at $64,500 is created.
5. Trailing Stop Order
What it does: Follows the price at a specified distance. If the price reverses — the stop triggers.
When used: To lock in profits or automatically exit on a trend reversal.
Pros: Automatically adapts to price increases.
Cons: May trigger prematurely in a volatile market.
Example: BTC price — $68,000, trailing stop at 3%. If the price rises to $70,000, the stop level rises to ~$67,900. If it falls below this level — it sells.
6. OCO Order (One-Cancels-the-Other)
What it does: Combines two orders — if one triggers, the other is canceled.
When used: For simultaneously setting take profit and stop loss.
Pros: Convenient for automatic position management.
Cons: Not all exchanges support it.
Example: You bought BTC at $68,000. You set OCO:
Sell limit at $72,000 (profit).
Stop-loss at $65,000 (loss limit).
Additionally:
IOC (Immediate or Cancel): Executes partially or fully immediately, the rest is canceled.
FOK (Fill or Kill): Executes completely immediately or is canceled.
Post Only: The order does not enter the book as a market order (avoids maker fees).