TYPES OF ORDERS

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An order is an instruction that is sent to the broker to open or close a position. On the one hand it looks quite simple: you press the “buy” or “sell” button at the right time, and the work is done. Orders are divided into two main types: market and pending. Besides them there are orders “Stop Loss” and “Take Profit”.

Market order

A market order is the most basic type of trade order. It represents a command to the broker to buy or sell at the best price currently available in the market. The order entry interface usually has “buy” and “sell” buttons for quick and easy use. Typically, a market order is executed immediately.

The advantage: you are guaranteed a position. If you absolutely must enter or exit the market, a market order is the surest way to go.

Disadvantage: A market order does not guarantee that you will execute the trade at the price you have specified. That is, slippage is possible.

Considering the disadvantage of this type of trading order, it is better to use it in the markets with high liquidity.

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Pending order

Pending order is an instruction to a brokerage company to buy or sell a financial instrument at specified conditions in the future. There are following types of pending orders:

Buy Limit – trade request to buy at the Ask price that is equal to or lower than that specified in the order. The current price level is higher than the value set in the order. Orders of this type are usually placed in the expectation that the instrument price will start to grow when falling to a certain level.

Buy Stop – trade request to buy at the Ask price that is equal to or higher than that specified in the order. The current price level is lower than the value set in the order. Orders of this type are usually placed in the expectation that the security price will overcome some level and continue its growth.

Sell Limit – trade request to sell at the Bid price, which is equal to or higher than that specified in the order. At this the current price level is less than the value set in the order. Usually such orders are placed in expectation that the instrument price will start to decrease, having risen to a certain level.

Sell Stop – trade request to sell at the Bid price, which is equal to or lower than that specified in the order. In this case the current price level is higher than the value of the set order. Orders of this type are usually placed in the expectation that the security price will reach a certain level and will continue to decrease.

Buy Stop Limit – this type of order combines the first two types being a stop order for placing Buy Limit. As soon as the future “Ask” price reaches the stop level specified in this order (the “Price” field), a “Buy Limit” order will be placed at the level specified in the “Stop Limit Price” field. The stop level is set above the current Ask price, and the Stop Limit price is set below the stop level.

Sell Stop Limit – this type of order is a stop order for setting a limit order for sale (“Sell Limit”). As soon as the future “Bid” price reaches the stop level specified in this order (the “Price” field), a “Sell Stop Limit” order will be placed at the level specified in the “Stop Limit Price” field. The stop level is set below the current Bid price, and the Stop Limit price – above the stop level.

Sell Stop Limit
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All of these orders you can use when trading futures. What futures trading is and how to trade it on binance is in this article.

Limit orders

Limit orders allow you to open a position at a specific price or better. In other words, you only buy at or below your price and sell at or above your price. For example, a $60 buy limit order means that you will enter the market at either $60 or below, say $59.85, which initially adds a profit of 15 cents on each security purchased.

Advantage: you get the price you expected, or even better.

Disadvantage: a limit order does not guarantee a trade will execute. If the market does not reach your price, or misses it (slippage), the order will remain intact.

Keep in mind that in order to use limit orders, you must know in advance at what price you want to enter the market. And secondly, there are situations where a security reaches the limit order level, but still does not open a position because there are not enough buyers or sellers in that area.

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