Understanding Different Trading Orders

Introduction

There’s a lot of confusion involved around cryptocurrency trading because there are just so many different types of trading orders. Basically, there are market orders that are executed immediately at the current market price and limit orders that execute a specified order after the price reaches the set conditions. Other order types are derivatives with different forms and functions. In reality, every trading order is defined according to transaction methods.

If you want to fill orders by your will, you have to understand those different order types. By doing so, you will know how the market will process your orders. This article will present you with some common financial order types, including market orders, limit orders, stop-loss orders, and order types that are derived from basic orders.

Market Orders

Definition & how it works

A market order refers to a real-time trade at the current price in the market. It is an order type that is executed immediately without a specified price. People who place a market order are called ‘takers’. Compared with a limit order, the market order can be filled but will not be completed at a specific price. If you want your order to be executed immediately, you can choose a market order.

For example, you want to buy two Bitcoins whose transaction price is $20,000, and the price increases rapidly. If you think the current price is reasonable and want to seize the opportunity, you can pay $40,000.

You’re the buyer. The seller, relatively speaking, places a pending order on the order book. In this example, the market order of 2 BTC you purchased at $40,000 is a sell order of 2 BTC at the price of $40,000 that is posted in advance. In practice, the trading platform flattens the placed market order with the limit order recorded in the order book.

This means that you are not a Maker but a Taker, that is, you are not the party placing the order in advance, but the party accepting the order that is issued in advance, filling the existing order and removing it from the pending order book. You buy market and it disappears from the pending order list on the order book. The taker digests the liquidity of the trading platform; on the contrary, the Maker places an order in advance to add liquidity to the platform. It is possible that the maker will reduce the handling fee as a reward.

Notes on Market Orders

Market orders are divided into buy orders and sell orders. When the user places an order on the trading platform, the order will be placed at the best price. The best price is not exactly the current market price displayed in real-time but is based on the price matched by the order book at that time. Therefore, the transaction price could be different from the market price when the order is placed.

In short, the most recent trading price at the moment is not necessarily the current price because market orders will be filled when there is a certain degree of liquidity and are traded according to the limit orders in the published order book. We can say that the number of limit orders will affect the depth of the market.

We can now understand that a market order is suitable for users who want to conduct real-time trading at the current market price. If you want to buy Bitcoin when the price is rising rapidly, it is suggested that you place a market order, buy as soon as possible and fill it at the market price.

Limit Orders

Definition & how it works

A limit order is placed with a buying or a selling price set in advance and is filled when the market price hits the pre-set price. However, if the market price has not reached the set price, the limit order will remain in the order book and wait for the transaction. The limit order is designed to allow users to clearly list the acceptable price range. It limits the highest bid price and the lowest ask price, which is called the limit price. It is the maker of the pending order.

A limit order is placed at the set opening price. When the market reaches the pre-set opening price, the position will be automatically opened. It is suitable for users who don’t want to keep an eye on the market price trend for a long time but predict that there will be an ideal price. Then, the user can use a limit order. Limit orders can only be filled at the limit price but they may not be executed successfully. We can understand it in this way: part of limit orders can be filled, while the remaining part will be presented in the order book, which seems like a quotation displayed on the market.

Order Book

The order book is the market that shows the price movement. The prices on the order book are arranged in order from high to low, which represents the buy and sell limit orders placed by investors in advance. The order is adjusted in real-time. The aggregated order for each price point is called the depth of the market.

Moreover, some exchanges will reduce the handling fee for placing limit orders in order to encourage users to place limit orders because more limit orders will increase the depth of the market. Want to learn more about limit orders? Click here.

Pending orders

Pending orders include stop-loss pending orders and take-profit pending orders. The former is to sell at a lower price than the current market price or to buy at a higher price than the current market price. In other words, it allows users to set a stop loss point in advance to protect users from greater losses. On the contrary, the latter is to sell at a price higher than the current market price or to buy at a price lower than the current market price. It is designed to evaluate the possibility of profit in advance. Therefore, users can set the take-profit to avoid losing all profits when the price rebounds, so as to obtain the maximum benefit.

Spot Trading Order Types

In addition to the most basic market orders above, spot trading orders include limit price, grid trading, time order, and tracking orders.

Market order

To place a spot trading market order, you can click the order price on the right. The order at the top is the sell order, and the bottom is the buy order. After you click and select, the order will be placed at the best price at that time.

Limit order

The limit order of the spot trading section has three extra functions. Namely, you can tick “Iceberg” to reduce the order quantity, tick “IOC” to automatically cancel the unfilled orders, and click “Stop-limit” to set the buying and selling price by yourself.

Iceberg

The “Iceberg” button allows you to reduce the real order quantity, and only the input quantity will be displayed on the public order list.

It should be noted that the hidden part of the iceberg order will be filled first, and will be charged a handling fee of 0.2%; the displayed part will be charged at a general handling fee rate. If the number of deals is over the hidden and displayed sections, a 0.2% fee will be charged.

IOC (Immediate-Or-Cancel)

When you place an order in the trading system, if the order cannot be fully filled immediately, that’s, only a part of the order was filled or all was not filled at that time, resulting in unfilled orders, the trading system will automatically cancel the unfilled quantity if you have ticked “IOC”.

Stop-limit

Click “Stop-limit” and you will find yourself in the section where you can set your own buy or sell price. By doing so, the transaction will only be completed when the market price reaches the set price. If the market price fails to reach the set price, the limit order will keep waiting for the transaction.

For example, when the price of the pending order to buy is higher than the current market price, the transaction will be filled at the best price in the market; when the price of the pending order to sell is lower than the current market price, the transaction will also be filled at the best market price.

Grid trading

Grid trading under spot grading is a trading strategy suitable for volatile markets. It allows users to set the price range and the number of grids, thus dividing the funds into several equal parts in a planned way. Accordingly, the system will buy in tranches when it falls and sell in tranches when it rises. In this way, users can keep selling high and buying the dip to obtain grid profits.

In grid trading, the smart grid of the grid quantity and price difference is properly set according to the interval market. Users can set the stop-loss price and take-profit price by themselves. Besides, users are able to configure the grid manually by setting the upper and lower limit prices and the number of grids, as well as selecting the common difference and the common ratio. All in all, it is flexible and user-friendly.

When the price fluctuates in a range that is almost sideways, it is suitable for you to use spot grid trading to sell high and buy low within the volatile range, thus earning profit from the spread. To know more, please read the article Guide to Spot Grid Trading.

Cyclical order

A cyclical order is a compound order to auto your market timing strategy in a volatile market by buying low and selling high, or selling high and buying low.

A cycle contains a (buy/sell) order (limit or market, limit order only at this time), a take profit order (limit order), and a stop loss (conditional) order.

How a cyclical order works: First, place a buy or sell order at a specified price; After all the orders placed are filled, place a take profit order (at a predefined percentage of profit) to sell(buy) the coin of the same quantity; Meanwhile, place a stop loss (conditional) order at a predefined percentage of loss. If the take profit order fills fully, the stop loss (conditional) order will not be triggered. This cycle ends and a new cycle starts again until the stop loss price is triggered. If the stop loss (conditional) order is triggered, the take profit order is canceled. A stop loss order will be placed at the predefined loss percentage. If this stop order fills fully, it will suspend for a while (a preset interval) before it begins a new cycle again. When both a buy order and a sell order fill fully, it makes a complete cycle. It takes at least one day and at most 7 days to complete a circle. Starting from the time the order is placed, it will be automatically canceled after it expires. Read the article Cyclical Order to learn more.

The stop-loss order mentioned above means the case that if a reverse take-profit order is placed after all the orders to buy (sell) are filled, a stop-loss order cannot be placed anymore due to insufficient volume or amount, and the stop-loss order can only be placed when the market price order is triggered and the take profit order is canceled. The conditions for a stop-loss order to be triggered are as follows:

If you place a buy order, the stop-loss (conditional) order will be triggered when:

• The latest market price is ≤ the average price of a buy order X (1- stop loss percentage)
• If you place a sell order, the stop loss (conditional) order will be triggered when:
• The latest market price ≥ the average price of a sell order X (1+ stop loss percentage)

Time condition order

The time condition order is a time-based condition order, which is triggered at a preset time interval (trigger interval) during the valid period. When it is triggered, it will check if other criteria are met. If met, a buy/sell order will be placed at the limit price and amount.

A time condition order can be set to have a validity period of 1 to 7 days. During the validity period, the system will automatically place an order according to the trigger interval. When the validity period expires, the order will be canceled, and the limit order triggered by the order will also be removed. Want to learn more? Please refer to the article Time Condition Order​.

It should be noted that only five-time condition orders are allowed to exist uncompleted at the same time. In theory, the trigger times can be calculated according to the following formula (the validity period is calculated in days):

Trigger times = validity period x24x3600/(trigger interval x60)

Trailing reversal order

A trailing reversal order refers to a strategy order that is automatically executed when the market price retraces according to the preset fluctuation range, in which you can set the rally rate and the activation price. When the market price meets the set conditions, the order will be triggered to place an order according to the preset order price and quantity. You can go to our help center and read Trailing Reversal Order to learn more. Next, we will introduce some settings.

How to calculate the Reversal Rate:

For a buy order, a trailing reversal order follows the lowest price.

Rally rate = (Last price-lowest price)/lowest price *100%;

For a sell order, a trailing reversal order follows the highest price.

Rally rate = (highest price-last price)/highest price *100%

A trailing reversal order can also have a validity period of 1-7 days. During the validity period, the system will automatically monitor the price fluctuations and trigger an order when the conditions are met. When the validity period expires, the trailing reversal orders that have not been triggered will be automatically canceled.

Contract Order Types

Contract order types are divided into Good-Till-Canceled (GTC), Market Order, Immediate-or-Cancel (IOC), Post-Only Order, Fill-or-Kill (FOK), Reduce-Only Order, Close Order, Iceberg Order, and Strategy Order (including SL/TP and Trigger Order).

Market orders

Market orders only take orders and are filled immediately at the optimal market price. Namely, it is completed at the price matched at the existing price in the order book. After you enter the contract orders page, click “Market order” to set your order. The handling fee charged for market orders is higher than that for limit orders. If you want to save time and trade at the best price at the moment, you can use a market order.

Good-Till-Canceled (GTC)

GTC orders are placed at the price specified, which is a limit order. On the contract order page, you can tick “limit price” - “Good-till-canceled” to use this order. If you click on the market price to trade, the order will be recorded in the order book if it is not completely filled. This will increase the market depth and it keeps waiting for the transaction.

Immediate-or-Cancel (IOC)

IOC is a type of order that will be filled at the limit price or the best price in the market. When part of the order is filled and some are not fully filled, the unfilled part must be canceled. This order type helps users to recover the liquidity of the remaining unfilled pending orders, allowing them to use their funds more flexibly.

For example, if you place an order to buy 2 BTC for $40,000, but you can only buy 1 BTC at the current transaction price, the order for the remaining 1 BTC will be canceled.

Post-Only

A post-only contract order is a limit order, which will be filled immediately after it is placed. Otherwise, it will be canceled, and no handling fee will be charged for this part. To use this order, you need to tick “post-only” on the contract order page. If you want to save taking order fees and avoid erroneous operations, you can choose a post-only order to trade.

Fill-or-Kill (FOK)

FOK refers to a type of order that will be filled or canceled immediately at the order price or a better price. Unlike the post-only order above, the whole FOK will be executed with the same order, that is, the entire order will be canceled if there is no way to fill it. To use this order, you need to tick “Fill-or-Kill” at the bottom of the limit price on the contract order page.

For example, if you place an order to buy 2 BTC for $40,000, but you can only buy 1 BTC at the current transaction price, the entire order will not be partially filled but will be canceled.

Reduce-Only Order

Reduce-only order is a derivative of the limit order. It is designed to execute the order for the purpose of closing the position, that is, it will not increase the number of positions but only reduce the position. It should be noted that the system may automatically cancel or partially fill the order in order to ensure that the position will not increase. Namely, if the position goes oversized, it will be canceled, thus avoiding the case that it increases position or reverses position but users know nothing about it.

Moreover, you can tick “reduce-only order” when placing a market/limit/trigger order.

Close Order

For one contract order, there is only one close order. A close order only reduces the position and doesn’t increase the number of positions. However, it should be noted that the close order will only be displayed in the two-way position mode.

Iceberg Order

Users can reduce the number of orders displayed on the OrderBook in the market. However, a certain amount of transaction fee (taker role) will be charged as a penalty when the order is filled between the actual number and the displayed number and no VIP discount can be applied.

You can tick “iceberg order” when placing a market/limit/trigger order.

Strategy Order

Strategy order includes trigger order and SL/TP. Strategy order refers to that order will be placed automatically with the preset order price once the market price reaches the predefined trigger price.

Take-Profit and Stop-Loss orders exist along with the position. Namely, if the position doesn’t exist, Take-Profit and Stop-Loss orders will also be canceled. Yes, they also only reduce the position. However, a trigger order exists independently. That’s to say, a trigger order will still exist even if the position disappears.

Trigger order
As a kind of strategy order, a trigger order will be filled at the marked price or the latest price, and the quantity set in advance by the user when the market price hits the trigger price. The created order will be input in the order list on the order book, waiting for the transaction.

SL/TP Order
Take-Profit and Stop-Loss orders are also a kind of strategy orders. They are designed to be executed after the pending order reaches the preset price. It should be noted that the set price is divided into the marked price and the latest price. They’re different because they have different trading market ranges.

Take-Profit and Stop-Loss exist along with the position. If the position is not there, the orders will also be canceled. They have a reduce-only nature. A trigger order does not follow the position. If the position is not there, the order will still exist.

Conclusion

There are hundreds of trading orders and strategies in the market. You will be able to choose one or more order types and trading strategies according to your needs only after you understand the different order types.

Stop-loss orders can be used to reduce the risk of potential losses, or you can select alternative orders to buy or sell for profits. Moreover, it is also an effective way to control profits and costs by taking effective time into consideration when processing unfilled orders.

Remember that the use of market order may result in slippage caused by the price difference and liquidity, and the handling fee is higher. Therefore, it is recommended that investors take the next action on the premise that they hope to make a deal as soon as possible. On the contrary, the limit order may also fail to be filled because the transaction price doesn’t match the set price. Therefore, users may miss a good time to enter the market.

Besides, users should pay attention to whether the setting is successful. Here you can check in advance whether the account balance is sufficient, whether the contract exceeds the risk limit, whether it is a one-way or two-way position with the set direction, and whether there is a conflict with the close order.

Finally, it is important for users to understand the mechanisms and usage scenarios of different order types before entering the market, so as to trade more efficiently.