Every cryptocurrency transaction occurs through a crypto exchange. There are various crypto exchange platforms in India. All have the same functioning to support digital transactions and investments of cryptocurrencies.
Many people have considered crypto trading as a golden opportunity to earn higher returns. While trading they have to choose between the limit order and market order depending upon the nature of the transaction. Every crypto trading application involves this step before the dealings and payments.
This article will cover a brief about the market and limit orders that will guide you every step of the way.
What is a market order?
In simple terms, a market order is a technique to sell, buy and exchange certain assets immediately at the current market price. It is the easiest type of trading order. These orders are placed by the traders when they are sure to execute the transactions. A common example of the market order is selling 0.75 Bitcoin (BTC) instantly at the best price possible in the market irrespective of the fact that the prices can go high or low in the near future.
Now let us come to the working of market orders.
How does it work?
Market orders are to be instantly executed at the current prices. Suppose you agree to sell your bitcoin or any altcoin for the price other buyers are ready to pay you now. This will be categorised under market order, the buyer and seller agreeing to make a transaction at the same point in time with the prevailing price of that cryptocurrency.
The only drawback of the market order is that you are accepting the exchange filling your order at the best price suitable for that time. Furthermore, the traders who agree with higher prices get their market orders filled first and more sensitive ones lose out.
What is a limit order?
Unlike market orders, limit orders allow the users to set the prices themselves. In this type of order, you have to set the price according to the parameters and your expectations. After deciding the price, you just have to wait for the right buyer to come and buy the cryptocurrency. These orders are placed to limit the risk of prices in the market. Furthermore, the limit order is also known as a Good till cancelled order.
After the introduction of the limit order, let us move forward with the working of the same.
How does it work?
If you want to sell bitcoin at a specific price only different from the current market price. Then limit order is the right option for you. In this, you have to wait for a while until the price of the asset reaches the limit you have already set.
One important piece of information that you must know is that if the price is set higher than the current price of buys and lowers for sale, it may result in immediate fill as there is a better price available than the limit price decided.
The potential disadvantage of the limit order is if the specified price is not met by any interested buyer in the mentioned time span then the order will remain unfilled. Furthermore, these orders are time-stamped so it becomes imperative to watch out for the date and timings to carry forward your orders.
Both of the orders play a significant role in crypto trading practices in India. You will always find the options in every crypto exchange app like Wazirxat the time of placing an order. However, market order and limit order have their unique characteristics and value. For beginners, it is recommended to start with a market order to get a hold of crypto trading procedures.