Cryptocurrency trading is more than buying at low prices and selling at high prices. To succeed, traders should know the various types of crypto trading strategies and understand their order types, as they are an important aspect of the trade strategies. Both new and experienced traders could benefit by learning the order types because they could help to protect their money, manage risk, and gain more profit.
This guide will take you through the types of crypto trade orders and how they work in the current advanced trading platforms.
Getting Started with Crypto Trading Systems
The crypto trading systems are virtual platforms that enable traders to trade digital assets instantly. Some of the features included in such tools are live order books, price charts, trading bots and auto execution. They assist the trader to execute the strategies carefully, more so in the case of volatile markets.
The systems have gained immense popularity over the past years. As per CBN, almost 13% of adults in Cyprus currently hold digital assets. This rising activity has generated an increased need for convenient and safe trading platforms, leaving crypto trading systems more significant than before.
No matter which exchange you decide to use, whether it is global like Binance or a regional one, the primary activity is to make trades and initiate them by understanding the various types of orders that can be executed.
Basic Order Types Every Trader Must Know
If you trade Bitcoin, Ethereum, or altcoins, these fundamental order types will be your first steps to risk management and informed decision-making.
Market Order
A market order is an order that is executed at the best available price. It is the quickest method of selling or purchasing crypto, particularly in well-liquid markets.
When to use: When the time of delivery is more important than cost, such as with breaking news or when volatility erupts.
Limit Order
A limit order pegs a particular price at which you wish to sell or buy. The trade will be performed only when the market hits the price you want.
When to use: You want to have control over the precise entry or exit point and do not want slippage.
Stop-Loss Order
This is an order that automatically sells your crypto when the price reaches a set level that has been pre-decided. It helps in reducing loss when the market goes against you.
When to use: When you want to shelter your capital in a declining market. It serves as a fallback.
Take-Profit Order
A take-profit order fixes your profits by selling your crypto at the price when it reaches your target profit.
When to use: You need to secure profits following a certain gain rather than risk a further fluctuation.
Trailing Stop Order
This order is a market-adjusting stop-loss as opposed to a fixed stop-loss. In case your crypto continues to increase, the stop level follows it at a fixed distance behind, which secures profit in case the price reverses.
When to use: At volatile uptrends when you do not want to monitor it all the time, but want to maximize profit. All of these five types of orders make up the foundation of entry-level crypto trading.
Advanced Order Types for Strategic Trading
Institutions and professional traders may need a more subtle control over their trades. Advanced order types are more accurate and suited to automation and algorithmic trading configurations.
OCO (One Cancels the Other)
This order is a combination of two conditional orders, a stop-loss and a take-profit. Once triggered, the other is automatically cancelled.
Use Case: It is best when you want to set both a profit and a risk target, simultaneously, which is typical of volatile altcoin trading.
Fill or Kill (FOK)
This order should be filled instantly, completely, or not. In case it is not possible to complete it immediately, it is canceled.
Use Case: Institutional traders or whales will use it when they need a large trade to be executed, but only when full liquidity is available.
Immediate or Cancel (IOC)
This order tries to fulfil the entire or part of the order immediately. Anything that cannot be filled immediately gets cancelled.
Use Case: Appropriate in partial implementations in markets that are fast-moving and time matters.
Iceberg Orders
An iceberg order conceals the size of the order. Only a small visible amount appears in the order book, and the rest remains hidden until the visible amount is filled.
Use Case: Applied to prevent arising suspicion in the market when making a large trade, typical of hedge funds or traders with a large net worth.
Time-Weighted Average Price (TWAP)
TWAP splits a big order into smaller parts, implemented over time, to achieve an average price.
Use Case: It can help in cutting down the impact of price in low-liquidity markets or when accumulating.
These advanced orders are the focus of algorithmic and institutional forms of crypto trading, where strategy implementation and market manipulation are highly regulated.
Conclusion
It is no longer a choice to know the types of crypto trading orders there are in the market today. You can be a day trader seeking quick entries or a long-term investor hedging risk, and the correct selection of an order type will provide a competitive advantage.
As a beginner or a pro in crypto, you must know the basics of the trade. Above all, trade with a plan, because in crypto, not only is timing, but the way you enter and exit a trade is also everything.
