Lesson 3 of 6 · 8 min

Market, Limit and Stop Orders

The three basic orders answer three questions: do you want immediate execution, do you want an exact price, or do you want protection? None is better in itself. Each one gives something up.

Market order

It executes immediately at the best available offers. You get certainty of execution, but not of price. It suits situations where you must enter or exit right now and the market is liquid enough for your size. It is not suitable for thin tokens, where a larger order can move the price a lot.

Limit order

You set the worst acceptable price: the highest when buying, the lowest when selling. If the market does not reach it, the order stays unfilled. You get control over the price, but you can miss a move. If it adds a new offer to the book, it often pays a lower fee (maker). If it immediately matches an existing offer, it executes like a market order (taker).

Stop order (stop-loss)

A stop order stays dormant until the price touches the trigger. When protecting a long position, the trigger is below the current price. Once triggered, it becomes:

• Stop-market order: sells at the next available offers. Exit is almost certain, but the price can be worse than the trigger.
• Stop-limit order: places a sell with a set lower bound. The price is under control, but if the market gaps below it, the order may stay unfilled and you remain in a growing loss.

Other terms you will see

• Take-profit: an order to exit at a predetermined higher level on a long position.
• OCO (one cancels the other): two linked orders, where the execution of one cancels the other. A stop and a take-profit are often combined this way.
• Post only: a limit order that is cancelled if it would execute immediately, so it keeps the maker fee.

In the next lab, try buying with a market order and a limit order on a small book. Ask yourself which order actually gets filled and at what average price.