Market Order vs. Limit Order: What is the difference?

When it comes to buying and selling crypto, it is critical to understand that you have two options: market order vs. limit order. Let’s go over what these two strategies entail so you know which one is best for you the next time you trade crypto.

Additionally, getting started in the market can be nerve-racking for new traders. There are numerous obstacles to overcome, ranging from planning your first market buy or sell, to using the right strategies to trade. Whatever type of trading you end up doing, mastering the fine art of making smart trades can save you money and time in the long run.

What is a Market Order?

Market Order is the most basic type of trading order, and they are used by traders who want to ensure that the deal they have chosen will be executed. A market order is immediately executed, and the trader simply places an order to buy or sell an item, such as Bitcoin, at its current price.

Market orders should be executed in real-time, or as close to real-time as possible. When a market transaction occurs and the order is fulfilled, traders say “the order has been filled.” A market order is always filled as soon as possible; otherwise, it is not executed.

This is a notably useful strategy if crypto traders anticipate a drop in price. These are frequently used by traders to initiate a long crypto position. Crypto traders should check the bid-offer spreads before placing a market order. This is because a narrower spread indicates greater liquidity and a more competitive market.

What is a Limit Order?

While a market order is essentially an order placed by traders to buy or sell an asset at whatever the current price is, a limit order is an order to buy or sell an asset at a specific price. Limit orders are placed in order to limit price risks.

The great thing about using a limit order is that you can set your own price, and if the stock reaches that level, the order will almost certainly be filled. Occasionally, the broker will even fill your order at a lower price. Limit orders can typically be set to execute up to 3 months after they are entered, which means you don’t have to watch obsessively on your computer or phone to get your price.

However, the biggest disadvantage is that you are not assured to trade the asset. The trade will not be executed if the stock hasn’t hit the limit price. Even if the asset reaches your limit, there may be insufficient demand or supply to fill the order.

Market Order vs. Limit Order


More On Limit Order

There are also buy-and-sell stop-limit orders, which are more specific and a little bit complex (if you’re just starting out!) than regular buy-and-sell limit orders.

  • Buy Stop-Limit Order. This stop-limit order incorporates the features of a stop and a limit order, giving the trader more control over the trade execution, but it is not really an assurance that your order is going to be fulfilled.
  • The sell stop-limit order is the polar opposite of the buy stop-limit order. To reduce your risk in a deal, you may wish to sell an asset if it falls below a certain level.

The decision between a market order and a limit order will be determined by the specifics of your trade. In general, if you aren’t concerned about not receiving a specific price, a market order will go a long way toward ensuring that your transaction is completed on time.

market order vs. limit order

However, if you’re worried about a specific price, a limit order’s helpful because the transaction won’t take place unless you get your price. However, it may take longer, and you may miss out because of a volatile market. Take into account how these and other relevant factors fit into your day trading strategy before placing a market or limit order.

Happy trading!

-Martina

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