Most people think that all these volatile markets are just buying and selling, but it’s much more complicated than just that. In the markets, there are various different types of orders that you can use to buy and sell.
- Market orders are orders to buy or sell something as fast as possible.
- Different market orders can be used to your advantage, like the sell stop limit to cut losses on a long
- Orders like limit buy orders or limit sell orders can be used to buy or sell at supports or resistances.
- You can’t control what price a market order will get you.
The most common and simplest type of market order is the simple market order. This order can be used for both buying and selling. What a market order does is give you the available price in the market. If you buy with a market order, then you will get the price that other sellers are willing to sell for, or vice versa( if you sell, then you will get the price that others are willing to buy for). The good thing about market orders is that they instantly exit you out of a position, but they also come with their own cons.
The bad part about market orders is that you don’t know at which price you will end up buying or selling, and on some exchanges, market orders can have high fees. Buying a market order means that buyers are willing to pay, which is known as a “bid”, order and an “ask,” price, which means that sellers are willing to sell the market. This can also be a problem for a trader if there is a tight bid/ask spread and you either pay the ask price or sell the bid price.
In a market that has a large bid/ask spread, you will end up buying or selling at a much different price.
Buy Limit Order
A buy limit is an order that buys when a specific price is reached. It is also placed below the current price. The order will only be filled at or below the limit price. Many people use them for target prices for entries or as a take profit for shorts.
Sell Limit Order
A sell limit is an order that sells or shorts when a specific price is reached. It is placed above the current price and will be filled only at or above the limit price. Many people use them for target prices as well, like the limit orders and take profit levels for long trades.
Buy Stop Order
A buy stop is an order that is placed when it’s placed at or above the stop price. It is set to purchase above the current price. Many people use this type of order to exit out of short trades. These orders act like market orders once the stop price is reached and are useful when the trade is going against you.
Sell Stop Order
A sell stop is an order that will only be filled when it is at or below the stop price. It is used to sell when it is placed below the current order price. Many people use these orders to exit long trades. Similarly to the Buy Stop order, the Sell Stop order is used to exit orders once the take profit is reached or when the trade goes against you to the downside.
Buy Stop Limit
A buy stop limit is an order that isn’t like a market order; instead, once it reaches the stop, it will trigger a buy order when it is at the buy stop limit price or lower. The limit order also prevents you from paying a higher price than you should, unlike the market order. A useful scenario for using the buy stop limit is when you want to buy something at a specific price.
Sell Stop Limit
Similarly to the buy stop limit, the sell stop limit order is similar to the sell stop market order, but instead of using a market order, it uses a limit sell order, meaning that the sell limit will only be filled at the price equivalent to the limit price attached to the order. If you need to sell a long, or if a trade isn’t going your way, you can use a sell stop limit to exit, and it also prevents you from selling at a lower price than you should, like the buy stop limit.
There are many different types of market orders. It is best to know what each does and how you can use them for your advantage. If you are waiting for a certain price point to go up, then you may want to use a limit buy order, since price could happen when you aren’t around the charts, or if you are waiting for a short opportunity, then you could use a sell limit to short the market. Even if a trade isn’t going your way, you could use a stop order to cut losses.