How to choose an order type
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
Order types split broadly into two: a market order that fills right away, and a limit order that waits for the price you name. The simple rule — limit when you are not in a hurry, market when you need the position moved for certain — covers most situations. Check which order types your exchange offers, then try each once with a small amount so you learn how they look on screen.
Key points
- A market order prioritises certainty of execution; the price is not fixed until it fills
- A limit order prioritises price, and simply sits unfilled if the market never reaches it
- Which order types exist, and what they are called, differs between operators
- In a brokerage-style service you usually cannot choose an order type at all — you trade at the quoted price
Definition
The way you specify how an order should execute when you place it on an exchange's order book — naming a price, or naming only a quantity and taking whatever the book offers now.
Start with the difference between a market order and a limit order. A market order says 'buy (or sell) now, whatever it costs', and matches immediately against what is on the book. It will fill, but you do not know the fill price until it is done. A limit order says 'buy (or sell) if the price reaches this level' — you control the price, but if the market never gets there, the order just sits. Neither is better; they prioritise different things.
The rule of thumb is straightforward. Market orders suit the case where you must move the position today, or the amount is small enough that a little price difference does not matter. Limit orders suit the case where you refuse to pay above a certain level and you have time. When unsure, placing a limit order and watching is the calmer default, because the price stays under your control.
Depending on the operator you may also find stop orders (which release a market or limit order once a trigger price is hit), OCO pairs (two orders where filling one cancels the other), and various other conditional types. The names and the way they are grouped on screen differ, so read your own exchange's documentation for the full list. The mechanics are explained in the glossary under 'stop-loss order', 'OCO order' and related terms.
One trap worth naming: the difference between the exchange-style and brokerage-style parts of a service. In the brokerage style you buy and sell at the price the operator quotes, and there is generally no order type to choose at all. Some apps contain both and open on the brokerage screen by default. Always confirm which screen you are on before placing an order. 'Exchange versus brokerage' covers this in detail.
Finally, how to practise. Do not try an unfamiliar order type for the first time with a large amount. Place one market order and one limit order near the minimum size, and look at how each appears in your order list and where the cancel control lives. That alone prevents most of the frantic hunting for buttons that happens when the market is moving.
Watch out for
- · A market order in a thin market, or during a violent move, can fill far away from the price you expected
- · Order names differ between operators, and the same word can describe different behaviour. Read the documentation before using a type for the first time
- · This article explains how orders work; it is not a recommendation to trade. Any decision should follow your own financial plan
Frequently asked questions
Which should a beginner use?
There is no single right answer, but a limit order makes the 'that is not the price I expected' surprise less likely, because you set the price yourself. Just be aware it may simply never fill.