What are the Different Crypto Order Types?

This article explores the different crypto order types, especially the ones available on the Finst platform. Simply put, order types are different ways or methods in which you can buy, sell, and trade crypto. We’ll be looking at market orders, limit orders, and stop-loss orders in specific and elaborating on the pros and cons of each.

What are the available crypto order types at Finst?

The following three crypto order types are currently available and/or will shortly be available to you on the Finst platform.

Market Orders

Let’s start things off with arguably the most simple and well-known order type, market order. When you place a market order, you’re giving an instruction to buy or sell a cryptocurrency at the best available price in the crypto market, with instant execution.

Market orders offer the benefit of immediate execution and assured fulfillment. They are ideal for traders who value speed over price considerations.

Two disadvantages with market orders are that they can be affected by slippage, meaning they might not fill at the expected price, and once you place them, you can't cancel them.

For example, if you want to buy Bitcoin (BTC) right this minute, regardless of its price, you’d be placing a market order.

Limit Orders

Moving on, let’s take a closer look at limit orders. A limit order is an instruction to buy or sell a cryptocurrency at the price you specified or better.

The advantage of limit orders is that you have more control over the price and execution. You have the flexibility to set a specific buying or selling price that you deem favorable. A limit order is usually valid for either a specific number of days (i.e. 30 days), until the order is filled, or until the trader cancels the order. The term for this is Good-'til-cancelled (GTC).

On the flipside, limit orders do not come with an execution guarantee if the specified price is not reached or the quantity is not (fully) available in the order book. It is also important to keep in mind that limit orders follow a first come first serve principle meaning that your order may not be executed immediately.

For example, if you set a limit order to buy Ethereum (ETH) at a price of €3,000 or lower, you would automatically buy ETH once the price reaches €3,000 or lower. The same would occur if you set up a limit order for selling your Ethereum at a price of €3,200 or higher, the order will be executed automatically once your price threshold is met.

Stop-Loss Orders

On to our final order type and probably the most advanced out of the three, stop loss orders. A stop-loss order is like a safety net for your crypto investment. It is designed to limit your potential loss on a cryptocurrency. For instance, you can set a stop-loss order below the price at which you bought the crypto. Once your stop price is reached, a market order is triggered and your order is executed. Keep in mind that if the price of the digital asset is going down rapidly you may lose slightly more than the stop price. It is also important to note that stop-loss is only for sell orders.

The main advantage of a stop-loss order is that it doesn't cost anything to set up. You only pay the regular trading flat-fee (0,15%) when the stop-loss price triggers and your crypto gets sold.

The primary drawback is that a brief change in a crypto’s price could trigger the stop price. It's crucial to choose a stop-loss percentage that accommodates the crypto’s day-to-day fluctuations while minimizing potential losses. For instance, setting a 5% stop-loss order on a cryptocurrency known for fluctuating more than 10% in a week might not be effective. In such cases, you might end up losing money primarily due to the trading fees incurred from executing your stop-loss order.

An example of a stop-loss order is if you buy Solana (SOL) at €170 per coin, you might set a stop-loss order at €150. If the price drops to €150, your Solana will be automatically sold to prevent further losses. In a scenario where the price of SOL is dropping rapidly, it may be that instead of receiving €150 per coin you may only get €148.

Leverage the power of crypto order types

Now that you’ve gotten more familiar with the crypto order types we offer on the Finst platform, why not give it a try? Simply open the Finst app and choose your favourite cryptocurrency and select the order type that best suits your investment needs.