A quick guide to different order types in crypto trading

Trading cryptocurrencies have become the most popular and profitable activity among traders in the trading world. Whenever you trade in crypto sphere, you have to interact with the market by placing different order types. Generally, these orders are the basic instructions to buy or sell cryptocurrencies like Bitcoin, Ethereum, etc. in a defined price range. Whether you are a seasoned pro or new to the crypto trading world, having the right strategy and right tools to manage risks, and execute trades is quite important.

The best crypto trading terminals offer a wide range of trading tools to traders. Understanding these order types can play an immensely valuable role in your trading strategy, and ensuring you are getting the most out of your trades. Let’s have a look at some popular order types:

1. Market Order - This is a simple order to trade at the prevailing market price.

2. Limit order - This order type only executes at a price which you have selected. Traders can use this order type to buy at a lower price or sell at a higher price than the current market price. A limit order provides you with more control and protection.

3. Stop Order - This is an order that automatically places a market order after the current price of the asset moves past your selected trigger price. Using a sell stop order will be of great help to automatically sell your assets if the market falls past a pre-specified level, and thus, protecting your position from further price falls. 

Apart from these orders, there are some advanced order types which traders can use to manage risks. These orders give you additional control over the execution. Let’s have a look at some of them:

1. Stop Limit Order - This order type combines the benefit of limit orders with those of the stop orders. Traders use this order type to execute precise limit orders once a specified price limit has been reached. 

• A sell stop limit order is used to place a sell limit order once a trigger price has been reached just like a stop order. This order type prevents additional losses if the price of the coin falls. 

• On the other side, a buy stop limit order is used to place a buy limit order once your desired trigger price is reached. It’s most beneficial if you believe that once a certain price threshold is reached, the price is likely to continue moving higher, and you want to benefit from this momentum. 

2. Take Profit order - This is a special type of order which traders can use to close the trade. This order type makes the trading results more profitable.  This is a standing order which is used to sell a crypto asset once it reaches the preset price. Selling at this level ensures that the trader will earn a profit on his trade. The take profit strategies are quite popular among those traders who prefer short-term trades. This order closes the open position for profit once it reaches the predetermined value/price.

Generally, T/P is a value which the trader chooses as the appropriate amount in case the trade moves in the favor of a trader. If that particular level of profit is reached, or once the T/P order is triggered, the trade will be closed automatically.  It’s a kind of pending order that locks in the trader’s profit automatically and lets them earn immediate profits.

Suppose a trader goes long i.e. he is entering a buy position by placing a trade at 12.280, expecting the price to reach higher. Now, he wants to benefit from the rising market trend. So, here he places a Take Profit order at a level higher than his entry price, say at 13.280. If the asset price hits the predefined Take Profit price, the position will be closed and the profits are locked in. 

On the other side, if the trader enters a sell position expecting that the prices for the asset will fall in the future, he places a Take Profit order at a lower level from the entry price. Let’s say, he has entered the market at the same price 12.280. Now, he decides to place a Take profit order at 12.080. If the stock price hits the level of 12.080, the position is closed. 

3. Trailing Stop Order - For certain traders, trailing stop orders are very beneficial. Managing risks and optimizing profits are the two basic views of a successful trade. And, trailing stop orders if executed properly can help you achieve both.  It is a risk-management technique where the trader sets their stop-loss to trail the current market price by a specific value or percentage. And, instead of using a fixed stop price, a trailing stop order follows the market price at a predefined distance.

• Trailing Stop Sell Order – It sets the initial stop price at a fixed percentage below the market price as defined by the Trailing Amount. As the market price rises, the sell stop price increases one-to-one with the market but always at the interval set initially by the trailing percentage amount.  If the stock price falls, the stop price will remain the same. When the stop price is hit, a market order is triggered. Reverse this for a buy Trailing Stop order. This strategy may allow an investor to limit the maximum possible loss without limiting possible gain.

• Trailing Stop Buy Order - With this order, the stop price trails the lowest price of the asset by the preset trailing price. If the price of an asset rises above its lowest price by the trail or more, it will trigger a buy market order. And, the stock will be purchased at the best available price.

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