Order Types 101: A Beginner’s Guide to Crypto Trading Orders
When trading crypto, knowing how to use the right order type is just as important as knowing what to trade. Understanding order types helps you manage risk, lock in profits, and avoid surprises whether you're flipping altcoins or buying Bitcoin. An easy-to-follow guide to Order Types 101 is provided below:
🛒 1. Market Structure What it does: It immediately buys or sells at the current market price. When to use it: in situations where speed is more important than price, such as in markets that move quickly.
Pros: Fast execution
Cons: Slippage may result in a lower price. For instance, if you select "Buy ETH," the transaction will begin immediately at the lowest possible price.
📍 2. Limit Order: What it does: Purchases or sells at a certain price or a higher price. When to use it: When you want control over price and are okay waiting
Pros: No slippage; more precise
Cons: If the price never reaches your target, it may not be filled. 🟢 Example: You set a limit order to buy BTC at $65,000. It will only execute if BTC drops to that price.
🛑 3. Order to Stop Loss What it does: When the price drops below the stop level you set, it automatically sells. When to use it: To protect yourself from heavy losses
Benefits: Reduces downside risk Cons: Can be triggered by short-term volatility
🟢 Example: You bought SOL at $150 and set a stop-loss at $140. To reduce losses, your position is sold if the price falls below $140.
🏁 4. Order for Profits (TP) What it does: Automatically sells when price reaches a target profit level
When to Use It: To Secure Gains Without Keeping an Eye On Them Benefits: Aids in securing profits prior to market reversals Cons: The price could just touch and then drop again, missing out on larger gains. 🟢 Example: You bought ADA at $0.40 and set a TP at $0.60—if it hits, the system sells for profit.
⚡ 5. Limit-Stop Order It combines a limit order and a stop order. How it works: A limit order is placed when the stop price is reached.
