Limit order or market order, which one do you choose? How to differentiate between the three order types in cryptocurrency trading

To aim for stable profits in cryptocurrency trading, it is essential to strategically use different order types. This article explains three basic order types that can be utilized by beginners and experienced traders alike, with practical examples. Understanding the mechanisms and advantages/disadvantages of each will help you identify the most suitable method for your trading style.

Limit Order — For Traders Who Prioritize Price Over Market Speed

A limit order is a method where you specify the price at which you want to buy or sell. It is suitable for traders who value executing trades at their desired price over speed.

How Limit Orders Work

This order type allows you to set a target price for buying or selling. If a seller or buyer appears at that price, the trade is executed immediately. If no counterpart is available, the order is displayed on the order book (order board), and it waits until a matching order appears that meets the conditions.

Advantages and Disadvantages of Limit Orders

The biggest advantage is that it guarantees execution at your target price. It also contributes to market liquidity. However, if the market does not reach your target price, the trade will not be executed, which is a risk. This method is suitable when you want to stick to specific prices or aim for small market fluctuations.

Market Order — For Situations Requiring Immediate Execution

A market order is an order that executes instantly at the current market price, ideal for situations where certainty and speed are priorities.

Features of Market Orders

This is optimal in emergencies when you want to buy or sell immediately regardless of the price. As soon as you place the order, it is executed at the best available market price at that moment.

Precautions When Using Market Orders

While they offer high certainty of execution and quick transactions, during market volatility, they may be filled at unexpected prices. Market orders are suitable when you need to finalize a trade quickly or when there are significant market movements.

Trigger Order — Your Strong Ally for Conditional Automated Trading

A trigger order automatically activates a limit order when the market price reaches a pre-set condition.

Use Cases for Trigger Orders

This setup automatically places a limit order once the market hits a certain level. It is very useful when you want to predefine the timing for profit-taking or loss-cutting.

Practical Comparison — Order Methods for BTC/USDT Pair

Let’s look at how the three order types function using the BTC/USDT order book. Typically, sell orders are shown in red, buy orders in green.

How Each Order Type Moves

• Using Limit and Market Orders — When to Use Limit Orders
  To buy 0.1 BTC at a limit price of 60,000 USDT, you wait until a sell order appears on the order book at or below 60,000 USDT.

• Using Market Orders for Certainty
  Buying 0.1 BTC with a market order will execute at the best available price, which might be around 60,004.17 USDT at that moment.

• Using Trigger Orders for Automated Selling
  If you want to sell 0.1 BTC at 66,000 USDT when the price reaches 65,000 USDT, you set the trigger price at 65,000 USDT and the sell target at 66,000 USDT. When the market hits 65,000 USDT, a limit sell order at 66,000 USDT is automatically activated.

Summary of How to Choose Among the Three Order Types

Each of these three order methods excels in different trading scenarios. Limit orders prioritize your desired price, market orders emphasize certainty and speed, and trigger orders enable automatic conditional trading.

For beginners, it is recommended to start with market orders to get accustomed to market movements. As you gain experience, combining limit and trigger orders can enable more advanced strategic trading.

By calmly assessing market conditions and selecting the order type that aligns with your investment philosophy, you lay the foundation for efficient asset growth.