Trading cryptocurrencies is as much an art as is a skill — that can be very profitable. But being glued to the screen waiting for the perfect price is something that doesn’t help any trader.
That’s why market orders and limit orders exist. They can help guide your trading strategy. But first, it’s a good idea to learn how the market and limit orders work.
Get to know how to create them and how they can give you an edge on your trading goals.
What are Market Orders and Limit Orders?
Both methods have their advantages and drawbacks, depending on your trading style. But let’s dive a little deeper into what exactly are market orders and limit orders.
Market orders, buy or sell orders, you place immediately. The trade is executed almost instantly, be it buying or selling.
The biggest advantage of market orders is that the trade usually gets processed right away. But since the cryptocurrency market is so fast and unpredictable, you could have an issue with slippage.
Slippage, the difference between the expected price and the actual price, can happen when your market order isn’t executed immediately.
Limit orders are buy or sell orders you place on a specific cryptocurrency. For example, if a cryptocurrency is trading at $13.00, you can place a buy or sell order when the price hits $10.00.
The biggest advantage of this method is that you don’t have to watch the market all day. You can just set your order and wait. Once the price hits your target, the trade will automatically execute.
The biggest drawback is that the trade won’t go through if the price target isn’t met. Using the example above, the price goes down to $10.01. Then goes back up without reaching the $10.00 limit order threshold. In this case, the limit order wouldn’t execute, and the trader misses an opportunity to execute a trade.
How to Create a Market Order and a Limit Order?
Depending on what type of order you choose, there are a few steps you have to take for each one.
Here we’ll walk you through how to place a market order and a limit order:
- Open the brokerage account or exchange platform of your choosing.
- Select the cryptocurrency you want to trade.
- Choose the amount you want to buy or sell (most platforms display the equivalent amount in fiat currency for this step).
- Once you place your trade, the platform will process the trade.
Note: If the platform you choose doesn’t differentiate between market orders and limit orders, the default option is usually a market order (buy/sell).
- Similarly, open the brokerage or exchange platform and select the cryptocurrency you want to trade.
- If the platform has the option for a limit order, you need to select it.
- Place the target price you want to buy or sell, and the amount you want to trade.
- Once completed, you can follow your trade on the open orders tab and see if it has been executed or not.
- Also, with limit orders, most platforms give you the option to cancel open orders if the trade hasn’t occurred yet.
How can Market Orders and Limit Orders Help You Trade?
Market orders and limit orders should both be in the mind of traders. If used correctly, they can enhance your trading style and strategy.
For beginners, limit orders can help you take away that urge to be glued to your screen. You can set orders without having to stress about timing the market.
What method is better depends on you and how you want to trade. If you’ve researched the market and are ready to make a trade at current prices, a market order is perfect for you.
But neither order type is a substitute for due diligence. There are several reasons why cryptocurrency gains value, which makes trading profitable. If you’re not proficient in the crypto space; learn more about crypto trading, and never trade more than you can afford to lose.
If you’re a beginner and want to know how to buy Bitcoin, check out our “Guide To Buying Bitcoin”. You can also learn about crypto and trading in the “How To Invest In Cryptocurrency” section on the Abra site.
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