An order (exchange application, order, Order) is an instruction created by the client to the exchange to carry out an operation to buy and sell cryptocurrencies under certain conditions.
There are several types of orders used in stock trading. According to the type of execution, market, pending and limit orders are distinguished.
Market order (Market Order) is executed immediately after entering the exchange, at the best current price, if there is a corresponding reverse limit order for it.
For example, to execute a market order to buy (Market Buy), a limit order to sell (Sell Limit) is required. To execute a market order to sell (Market Sell), a limit order to buy (Buy Limit) is required. A market order to buy is executed at the Ask price, and a market order to sell is executed at the Bid price.
In other words, market orders are filled at the best price until the number of units of the asset at that price is exhausted (Order quantity)
Pending order — an order type, the opening parameters of which are set in advance.
A pending order is executed only when there are conditions for its execution. For example: the current market price is 8000 USD per 1 BTC. We place a Take Profit order – when the price reaches 10,000 USD, sell 1 BTC at a price of 9,990 USD.
This situation means that at the moment the limit order has not yet been formed on the exchange and it is not in the order book. However, it “hangs” in the trading terminal and waits for the moment when the price of the last transaction (last price) reaches 10,000 USD.
A limit order is an order to buy or sell a certain amount of an asset at a specified price.
For example, a trader bought 100 certain tokens for $20 each. He expects the market to continue rising and the coin will reach $25. Since the trader cannot (or does not want to) constantly monitor his positions, he decides to take profit at $24.50. To do this, he sets a limit order to sell 100 of these tokens. If their rate reaches $24.50, then the limit order will be executed and the trader will make a profit. Excluding trading commissions of the exchange, it will be: 100*(24.50-20)= $450.
A limit order can easily be filled immediately if there is a counter order at that price (essentially the situation is the same as with a market order).
A limit order to buy (Buy Limit) is placed at a price that is lower than the current market price. The trader uses this order if he hopes that the price will first fall, and then, after rebounding from the support level, it will start to grow.
Limit Sell Order (Sell Limit) – an order to sell at a specified price. Sell Limit is placed at a price higher than the current market price. Thus, a trader uses this order when he hopes that the price will first rise, but then, having reached a given level, it will turn around and start falling (i.e., he expects a rebound down from the resistance level).
A stop order is an order to buy or sell a certain amount of a cryptocurrency when its price reaches a certain level.
A stop order to buy (Buy Stop) is an order to buy at a specified price or higher. The trader uses this order when he hopes that the rising price, having overcome the given resistance level, will still continue to grow. Buy Stop is set at a price that is higher than the current market price. As soon as the price of the last transaction becomes equal to or exceeds the price specified in the Buy Stop order, it immediately turns into a market order to buy. To trigger a Buy Stop order, the Ask price must be equal to or higher than the price specified in this order.
Stop order to sell (Sell Stop) – an order to sell an asset at a specified price or lower. The trader uses this order when he hopes that the price, with its downward movement, having reached a predetermined level, will continue to fall. Sell Stop is placed at a price that is lower than the current market price.
In other words, as soon as the price of the last transaction becomes equal to or less than the price specified in the Sell Stop, the order immediately turns into a market one. For the Sell Stop to be triggered, the Bid price must be equal to or less than the price specified in this order.
A stop order is used both to open a position and to exit it. In the latter case, the stop order is used as a protective order limiting losses (Stop Loss; stop loss). At the same time, the Buy Stop order provides hedging of a short position (sell), and Sell Stop – protection of a long position (purchase).
Also, any order on the exchange may not be fully executed, but partially (or even not executed at all). To execute an order, an opposite order is needed, but it may not be available at the current moment, or its size may not be enough for full execution. So, on the Bitfinex exchange, it is possible to place orders of the Fill-Or-Kill (FOK, “execute or cancel”) type. Such an order means that the order must be immediately executed or canceled. At the same time, partial closing or opening of a position on the FOK order is not allowed – the order can be executed only in the order
Glossary for the article
Bulls are players trying to make money on the growth of the asset price. When bulls dominate the market (buying exceeds selling), the price of the asset rises.
Bears are those who make money on the fall. By actively selling, the bears “fill up” the rate down.
A whale is usually an experienced and wealthy market participant, able to significantly influence the price of an asset and even the market as a whole with his large orders.
Fiat – national currencies of various countries (US dollar, euro, ruble, hryvnia, Chinese yuan, etc.).
A trend is a unidirectional price movement that lasts for a certain time. In other words, this is a well-visible area of price growth or fall on the chart. Trends are ascending (bullish), descending (bearish) and lateral (flat, sideways).
Tuzemun (“To the Moon”) – when the price rises sharply, as if flying “to the moon”.
Drain – a very sharp drop in the rate (the moment when panic-prone hamsters sell assets bought on highs; experienced investors at this time “set buckets” by placing limit orders to buy).
Support is the price level at which buyers enter the market. When moving down, the price rests on the “floor”. At this point, a number of buyers enter the market. The latter intercept the advantage from sellers for some time and hold back further price reduction.
Resistance is the price level of an asset at which a growing supply prevents the price from rising higher. As we approach the resistance level, the bulls are less willing to buy, and the bears are selling even more actively than before. The resistance level indicates the place where the price could potentially stop rising and likely turn down.
Pump (Pump) – “pumping” an asset with large volumes of purchases in order to cause an intensive increase in its price. Pump usually attracts hordes of “hamsters” who enter the market and support the upward movement of the price to the last. Usually a pump is replaced by a dump.
Dump (Dump), the same as a drain – a rapid downward movement in the price of an asset caused by active profit taking from the pump.
Short (Short, short position) – opening a position for sale. Used when trading with leverage. The basis for opening a short position is the expectation of a decrease in the price of an asset.
Long (Long, long position) – opening a position for sale in the hope of an increase in the price of an asset.
Volatility – fluctuations in the price of an asset. High volatility implies ample opportunities for profit, but also implies increased risks.
Take Profit is an order type designed to close a position according to the rules for executing limit orders. It is used to make a profit when the price of an asset reaches the predicted level.
Stop Loss (stop-loss, “elk”) – an order designed to minimize losses if the price of an asset moves in a loss-making direction. If the price of the instrument reaches the Stop Loss level, the position will be completely closed automatically. Such an order is always associated with an open position or a pending order.