In crypto trading, understanding the different order types is key to managing your risk and executing your strategy effectively. Here are the main order types you should know:
1. Market Order
Definition: Buys or sells immediately at the current market price.
Use When: You want instant execution.
Pros: Fast.
Cons: You might get a slightly worse price due to slippage.
🔹 Example: You click "Buy BTC" and it executes right away at the best available price.
2. Limit Order
Definition: You set the price at which you want to buy or sell.
Use When: You want a specific price and are willing to wait.
Pros: More control over entry/exit.
Cons: Might not be filled if price doesn't reach your level.
🔹 Example: You place a buy order for BTC at $65,000, but it won't execute unless BTC drops to that price.
3. Stop-Loss Order (Stop Market)
Definition: Sells (or buys) once a certain price is hit, to limit losses.
Use When: Protecting capital if market moves against you.
Pros: Automates risk management.
Cons: Can be triggered by volatility ("stop hunting").
🔹 Example: You're long on ETH at $3,000, and place a stop-loss at $2,800.
4. Stop-Limit Order
Definition: Combines stop price and limit price.
Use When: You want to trigger a limit order only after a stop level is hit.
Pros: More control than stop-market.
Cons: No guarantee of execution if price moves too fast.
🔹 Example: If BTC drops to $62,000 (stop), place a sell limit at $61,900.
5. Take-Profit Order (TP)
Definition: Closes your trade once the price reaches a certain profit target.
Use When: Locking in gains automatically.
Can be: Market or Limit orders.
🔹 Example: You buy BNB at $600 and set a TP at $650.
6. Trailing Stop Order
Definition: Stop level moves with the price to lock in profits while giving room for growth.
Use When: You want to ride a trend but protect profits.
Pros: Dynamic risk control.
Cons: Needs careful configuration.
🔹 Example: You set a trailing stop 5% below the highest price reached.
7. OCO Order (One-Cancels-the-Other)
Definition: Combines a take-profit and a stop-loss order. Once one is triggered, the other is cancelled.
Use When: You want to automate exit with both risk and reward levels.
🔹 Example: Buy ETH at $3,000, set TP at $3,300 and SL at $2,900.