#OrderTypes101

Market, limit, stop-loss, and take-profit orders: how they work and when to use them

1. Market Order

How it works:

- Buys or sells an asset instantly at the current market price.

- Executes quickly, but the price may differ slightly due to the spread.

When to use:

- When you need to quickly enter or exit a position (for example, during a sharp market move).

- For liquid assets (BTC, ETH), where the spread is minimal.

Cons:

- No control over the exact execution price.

- In low-liquidity markets, slippage can occur.

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2. Limit Order

How it works:

- Buys or sells an asset only at the specified price or better.

- Does not execute instantly – waits for the market to reach the desired level.

When to use:

- To enter a position at a favorable price (for example, buying Bitcoin at the support level).

- For gradual selling (place several limit orders at increasing prices).

Cons:

- May not be executed if the price does not reach the specified level.

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3. Stop-Loss

How it works:

- Automatically sells an asset if the price falls to a specified level, limiting losses.

- Can be a stop-market (sells at the current price) or stop-limit (sells at the specified price).

When to use:

- Always during active trading to minimize risks.

- In times of volatility or before important news.

Cons:

- In moments of sharp gaps (for example, on news), execution may occur worse than expected.

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4. Take-Profit

How it works:

- Automatically locks in profits when the price reaches the target level.

When to use:

- To secure profits without constant market monitoring.

- In combination with stop-loss (the "take-profit + stop" strategy is the basis of risk management).

Cons:

- If the market continues moving after taking profit, you may miss out on gains.

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My favorite type of order

Limit order + stop-loss – because:

- Allows you to control the entry price (not overpaying due to emotions).

- Automatically limits losses, even if I am not at the screen.

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Real example: when the right order saved the deposit

Situation:

- In 2021, I bought SOL at $140, expecting a rise.

- Set a stop-loss at $130 (7% risk).

What happened:

- A week later, SOL sharply dropped to $128 due to network issues.

- The stop-loss worked, and I exited with a small loss.

What would happen without a stop-loss:

- SOL continued to fall to $10 in 2022 (FTX crash).

- My deposit would have been wiped out.

Conclusion:

- Stop-loss is a must-have for any trader.

- Even if it sometimes triggers "in vain", once it saves from disaster.

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Order usage advice

1. For beginners: Start with limit orders + stop-loss (less emotion, more control).

2. For scalping: Market orders + take-profit (speed is more important).

3. Always check liquidity – on "thin" markets, orders may execute with slippage.

Main rule:

> "An entry plan is good, but an exit plan is what makes you a profitable trader."