Dominate cryptocurrency trade with limit orders and market orders
The world of cryptocurrency trade can be discouraging, especially for beginners. With the wide range of options available, it is easy to get lost in the complexities of price movements and market fluctuations. Two essential concepts to dominate are limited orders and market orders: these two types of purchase/sale orders play a crucial role in determining the success of their commercial strategy.
What are the limit orders?
A limit order is an instruction to buy or sell a security at a specific price, as close as possible to that price. It is essentially a “stop-loss” for its trade, preventing it from selling when the market reaches its desired price. In other words, if security reaches a certain price level and is not ready to execute the order, you can use a limit order to block the profits.
To place a limit order:
- Identify security with a specific objective price or deterioration.
- Enter the market at the desired time using a negotiation or exchange platform.
- Place a “buy” (or sell) instruction with its specified price and quantity.
- Establish the loss arrest price to close the operation when it reaches that level.
How to effectively use the limit orders in trade
Limited orders offer several benefits, which include:
* Reduce risk : By limiting potential losses, it can avoid significant financial damage when security does not reach its objective price.
* Increased profitability : If security rises above the loss arrest price, it may capitalize on the increase in value.
* Improvement of liquidity : Limited orders help maintain market depth by allowing buyers and sellers to be negotiated at similar prices.
However, limit orders also have some inconveniences:
* Slowly execution : Due to its complexity, the limit orders may take longer to be executed than the market orders.
* higher rates : Some exchanges charge higher rates by limit orders compared to market orders.
What are market orders?
A market order is a general instruction to buy or sell security at the best available price. It is essentially an exchange of “all or nothing”, where you are willing to execute trade at any price offered by the market.
To make a market order:
- Identify security with a specific objective price.
- Enter the market using a negotiation or exchange platform.
- Place a “buy” (or sell) instruction without specifying a loss detention price.
How to use market orders effectively in trade
Market orders offer various benefits, which include:
* Immediate execution : Market orders can be executed immediately, which allows you to quickly react to changing market conditions.
* Lower rates : Exchanges often charge lower rates for market orders compared to limit orders.
* Flexibility : Market orders give it more flexibility when operating, since it can adjust its detention price or objective price without affecting the execution of the operation.
However, market orders also have some inconveniences:
* Greater risk : If a security increases above its objective price without a corresponding increase in value, it may not be able to sell before even more.
* Reduced profitability : Market orders can cause losses if security falls below its detention price.
Combine Limit Orders and Market Orders
When using limit and market orders together, you can take advantage of the benefits that each offers. For example:
- Use a limit order to buy security at an initial price (for example, $ 10).
- Wait for security to reach the desired price.
- Place a market order when you reach the new price.
By combining these two types of orders, you can create a commercial strategy that balances the risk and reward, which allows you to take advantage of opportunities and minimize potential losses.