Understanding Order Types In Crypto Trading | Limit, OCO, IOC
Any person outside of the trading world will say that it's just a game of buying and selling coins at particular times. But once you dive into the world of trading you realise how hard it is to predict and implement your buying and selling processes. Even if you might have the trading strategy, but one thing is sure that you cannot assure that this trading setup is valid tomorrow because of the high volatility of the crypto market. But apart from trading strategies, even if you know where to buy and where to sell, you should not be waiting & watching the market for price to reach your target price, and even sometimes opening and closing positions at very particular times, levels, and in a particular manner becomes crucial for correct implementation of the trading strategy, especially your trading strategy involves frequent buying and selling. For that purpose various kind of order types are introduced in the trading world which ensures that the orders get filled at particular price and in a predetermined manner. So here in this article, we will look into some of the basic as well as very powerful order types which will make your trader life easy and more profitable!
This is the most basic order type, market order means that trader is ready to buy or sell any particular asset at the price provided by the market. Because of the simplicity and user friendliness of market orders, this is what mostly preferred by new traders who are just starting their trading journey.
Apart from the simplicity and user friendliness, market orders does not provide any additional functionality to the trader and also has a drawback as market determines the price, hence market orders are generally not preferred by the experienced traders.
These are the most preferred and popular order types in both traditional as well as crypto trading. In case of Limit orders, user provides the input to the price that he/she wish to buy/sell the asset and once the price level of that asset reach to that level, the orders will automatically gets filled. Limit Orders provides a considerable automation for the traders which I suppose is very important in trading.
The drawback of the Limit orders is if the price level provided by user never reach to that level then that order will be open forever. So it is important to provide the well researched and realistic input where you want to buy/sell the asset, so that the order gets filled.
These are the orders practiced by almost each experienced trader, as these orders are mostly used to take the ensure that losses are controlled. You might have heard about the order type called, 'Stop-loss (SL)', this is one of the measure taken by traders to control their losses.
It is adviced by each and every trader to use stop loss as well as take profits, as no one can guarantee the next move of the market especially in case of crypto market. So for that reason it is very important to learn and understand the Stop Orders.
OCO stands for 'One Cancels the Other', it is a combination of two types of orders, Limit & Stop Orders that we have already discussed earlier. Even though we can place two different orders on the same asset only of those can get executed and once one of the two orders get executed another gets cancelled. This is a little complex but a very useful type of order, as you can have 'take profit' and 'stop loss' orders at the same time.
Let's understand this by a simple example, Amit bought 1 BCH at $105 and he thinks that BCH can go to $115 in next couple of days but he also wants to minimise the losses so he don't want to hold that BCH if price goes below $98. In that case Amit can place an OCO order which involves the combination of two order which are as follows -
take profit if BCH surged to $115
stop loss if BCH dropped to $98
Now the two scenarios are -
Case 1: If BCH surged to the price $115 then the 'take profit', and his 1 BCH will be sold at $115. This execution of 'take profit' order will cancels the 'stop loss'order as there will not be any BCH to sell at $98.
Case 2: Now instead of rising, price of BCH dropped below $98, in that case the 'stop loss' order will get triggered and 1 BCH will be sold at $98. This execution will cancel the 'take profit' order.
IOC stands for 'Immediate or Cancel', that clearly suggests that this is an order type which has to be executed at the market price immediately. IOC is completely opposite to the Limit Orders, as execution has to be immediate and at market price.
IOC is generally preferred by the high-frequency traders, which is mostly carried out by algorithmic traders where immediate execution plays a critical role in implementing trading strategy.
This is all about the trading orders, hope you have got a basic understanding of these order types and you can implement these order types in your trading strategies.
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Thanks For Your Time!
Its hard to predict when tue crypto being hit the ath at the same time timing for being pump up high. It takes a lot effortd and understanding even watching the value of each crypto in the market