Types of Orders on Cryptocurrency Exchanges

Types of Orders on Cryptocurrency Exchanges

Orders are perhaps the first thing a novice trader will encounter on the stock exchange. This is the name of special teams to sell or buy cryptocurrency.

They are designed to set the conditions for opening and closing deals: price levels at which a deal should take place and the volume of the instrument to be bought.

Basic market orders

Market (Sell Market, Buy Market) are executed at the current market price at the time of sending an request to buy or sell an instrument. They are not included in the order book.

Stop (Buy Stop, Sell Stop) are used as auxiliary for Market orders. They set the conditions under which the swap ETH to BTC command or another instrument will be executed at the current price. Stop orders are pending Market orders and also do not fall into the order book.

Limit (Sell Limit, Buy Limit) are pending commands that set the conditions for buying or selling an instrument. Buy Limit orders are placed below the current price, and Sell Limit orders are placed above. It is they who enter the order book and form the depth of the market.

Auxiliary orders

In addition to commands for opening transactions on the exchange, there are also two common “technical” requests: Stop Loss and Take Profit. They are not available on all platforms. Unlike the main pending commands, they can be placed simultaneously for each open position.

Stop Loss is a Stop command that is executed when the price of an instrument reaches a certain level. The trader uses it to limit losses if the price of the instrument starts moving in the opposite direction from what the trader was counting on. Stop Loss works like a Buy Stop when it is set to close a sell position, and like a Sell Stop when it is set to close a buy position.

Take Profit is another kind of Stop command. It is triggered as a Sell Stop or Buy Stop when the exchange rate of ETH to CAKE or another trading pair reaches a level that the trader considers sufficient to lock in the profits earned by the time that level is reached. For sell positions, Take Profit works like a Buy Stop, and for buy positions, it works like a Sell Stop, respectively.

Orders on Cryptocurrency Exchanges

Depth of quotes

The depth of quotes contains all orders of the Limit type and looks something like this:

  • The top list (usually highlighted in red) contains Sell Limit (also called Ask) orders.
  • The lower list displays Buy Limit commands (also called Bid).

The difference between the lowest price in the red area (at the bottom of the red list) and the highest price in the green area (at the top of the green list) is called the spread. The smaller the spread (the difference between the best ask price and the best buy price), the higher the liquidity of the instrument at the current moment.

Orders can be divided into two categories:

  • Aggressive, which are closed instantly when opposite deals appear in the order book;
  • Passive ones that are not executed immediately after appearing in the order book due to the lack of opposite offers.

Analysis of the instrument based on the data of the order book can be carried out as follows:

  • The accumulation of Sell Limit orders with large volumes at prices higher than the current Ask price may indicate a possible price decline in the near future.
  • The accumulation of Buy Limit requests with large volumes at prices below the current Bid price may indicate a possible price increase in the near future.

It is important to understand that one indicator is not enough to analyze the market movement and an integrated approach is required. Understanding how orders work is an important part of the basics of cryptocurrency trading, especially for beginners. During the training, you can learn how to independently conduct a comprehensive analysis of any instruments and develop your own strategy for working in the market.