The great debate on the order of cryptocurrency: limit of orders compared to market orders
Cryptocurrency, a digital currency that uses encryption for safe financial transactions, has invaded the world in recent years. As their popularity grows, the number of investors trying to buy and sell cryptocurrencies also increases. Two popular types of requests were used in cryptocurrency markets: limit market orders and markets. Although they may seem similar, there are significant differences between these two types of orders that can affect your investment strategy.
Order limit
A limit is a specific price for which a merchant is willing to buy or sell a coin. It’s like a “order book” for the cryptocurrency market. A limit order usually has the following characteristics:
* BUY OR SALE : The type of transaction (purchase or sale)
* Price : The minimum and maximum prices that will be used to execute trade
* Quantity : The number of units exchanged (for example, 10,000 units for US $ 100)
When a trader reproduces a limit order, he is essentially saying, “I want to buy/. Whether this coin is for US $ x per unit when it reaches the price Y.”
Market orders
A market order is an absolutely or nothing transaction that will be performed immediately or at all. It is like a “market” compensation price that determines the price of cryptocurrency exchange.
When a trader reproduces a market order, he is essentially saying, “I want to buy/sell this coin for US $ x per unit now.”
What is better?
In general, limited orders are considered better than market orders when:
* You have a specific idea : You know exactly what you want to do with your money and have a clear floor. Limited orders allow you to run for the ideal price.
* You are exchanging large volumes
: If you exchange thousands or tens of thousands of units, the limits may help you achieve your goals more efficiently.
However, market orders are more suitable for:
* Short -term negotiation
: If you are trying to make a quick profit or quickly respond to market conditions, a market order may be the way to go.
* High frequency trade : For those who negotiate in real time, market orders can help them react faster to change market prices.
Real world examples
To illustrate the difference between limited orders and market orders, we consider two examples:
- Example of limit order
Suppose we want to buy 10,000 Bitcoin units at $ 20,000 per unit. Place a limit order with your broker to execute $ 20,000 if the price reaches this level.
In this case, the broker will use your algorithms to find the ideal price for you and run the negotiation when the conditions are met. If the price drops below $ 19,999, the transaction will be canceled and you will not see any profit (as it is not executed).
- Example of market order
Suppose we want to buy 10,000 Bitcoin units at $ 20,000 per unit immediately. Performs a market order with your broker.
In this case, the broker will execute the negotiation as soon as he receives an order for the specified quantities and price, which is $ 19,999 in this example (as long as the price fell to $ 19,999). Profit is calculated based on the difference between the current price ($ 20,000) and the desired price ($ 19,999).
Conclusion
In conclusion, although the limits of orders and market orders are essential tools for traders in cryptocurrency markets, they have different characteristics that can affect their investment strategy. Limited orders are best suited for specific situations, such as large volume trade or with a clear floor, while market orders are ideal for short -term negotiation, high frequency negotiation or regoner for changes in market conditions.