What is a limit order in cryptocurrency? What is the function of limit order in cryptocurrency? Investing in cryptocurrency has become a regular topic worldwide. Since the industry has been established for less than ten years and may overturn the financial industry as we know it, since the advent of Bitcoin in 2009, a large number of new entrants have emerged in the cryptocurrency field. The wide acceptance of cryptocurrency also increases the demand of traders for more trading options in cryptocurrency exchanges. In view of the multiple uses of cryptocurrency, Crypto Exchange enthusiastically accepted the task of creating diversified trading possibilities.
What is a limit order?
Some new users may jump to the price limit list. By setting price limit orders for assets, you can buy or sell at a certain price or higher in the trading market. For a limit purchase order, the order will only be executed at the limit price or lower price, while for a sell limit order, the order will only be executed at the limit price or higher price. This standard gives retailers greater autonomy over the prices of their goods and services.
By placing a limit order, an investor guarantees that the amount he or she pays does not exceed the specified amount. The price is guaranteed, but the order execution is not guaranteed. Unless the asset price meets the order qualification criteria, the price limit order will not be executed. If the asset fails to reach the specified price and the order is not executed, the investor may suffer losses.
What is the function of limit order in cryptocurrency?
Consider the situation where traders intend to purchase Bitcoin at a specific price, so as to better understand the importance of price limit orders in cryptocurrency trading. In order to benefit from the market, the trader will issue a price limit order for Bitcoin at the exact price.
Example: If the price of Bitcoin drops to US $20000, and the trader wants to obtain a Bitcoin (BTC), the trader will set the price limit to US $20000 precisely. Or, if the trader wants to sell Bitcoin when it reaches $30,000, the minimum selling price should be set to $30,000.
However, investors should note that if the price is set higher than the current buying price or lower than the current selling price, it may lead to immediate transaction, because a better price than the highest price indicated can be obtained.
The disadvantage of a price limit order is that if the buyer or seller does not reach the price limit within a certain period of time, the order will not be executed and cancelled. When placing an order within a limited time, the importance of time cannot be overemphasized, perhaps more critical. In exchange, provide a timestamp for each order entered in the order book.
Orders approved later have priority over earlier transactions, even if they have the same price limit as orders placed earlier in the trading session.
How does a limited price order work?
How does a limited price order work? When a limit order is submitted, it immediately enters the order book. However, it will not be populated until the token price reaches the maximum price (or higher). For example, suppose you want to sell 10 BNBs for $400 each, but the current price is $300.
You can set the price limit order of Binance as a BNB price limit sales order of $400. When the BNB price reaches or exceeds the target price, your order will be executed, depending on market liquidity. If other BNB sales orders are placed before you, the system will execute these orders before you. Then, your limit order will be filled with the remaining available liquidity.
When creating a limit order, you should also consider the expiration date of the order. Binance price limit orders can usually last up to 90 days. Due to market fluctuations, if you do not regularly monitor the market, you may buy or sell at unacceptable prices.
For example, if the current BNB market price is $300, and you have placed a limit order for 10 BNBs at a price of $400. One week later, the BNB price rose to $500. Since the market price exceeds the limit set by you, your order will be processed at 400 dollars.
In this case, your income is limited by the price target you set a week ago. Therefore, it is important to check your limited price orders regularly to keep up with the changing market environment.
Stop loss limit order and limit order comparison
Stop loss limit orders combine the characteristics of stop loss orders and limit orders. Once the stop loss price is reached, the limit order will be triggered immediately. If the market price reaches or exceeds the specified limit price, the order will be executed. If you do not have time to continuously monitor your portfolio, you may need to consider using stop loss limit orders to reduce potential trading losses.
When creating a stop loss limit order, you must provide two prices: stop loss price and limit price. Stop loss limit orders will be placed only when the stop loss price is reached, and the limit order will be placed in the order book immediately.
For example, if BNB trades at $600 and you execute a limit sell order with a stop loss of $590, the order will be executed at $590. This means that if BNB falls below $590, the system will automatically issue a selling limit order, and the price is equal to or higher than the limit price you provide (for example, $585).
However, we cannot guarantee that your products will be satisfied. If the market moves too fast, your order may not be completed.
Stop loss and limit order comparison
There are many kinds of stop loss orders, but they are conditional, based on the price that is not yet available in the market when the order is issued. Stop loss orders are executed once future prices are available.
Once your stop loss price is touched or exceeded, the stop loss will be converted into a standard market price list. Stop loss orders can also be configured as entry orders.
Therefore, if the price of cryptocurrency rises, a stop loss market order may be set above the current market price, and the transaction will be completed after the stop loss price is reached.
The main difference between a stop loss and a limit order is the visibility of the transaction. The former is visible in the whole market, while the latter is visible only after the transaction is launched.
In general, the above details what is the price limit order in cryptocurrency and what is the function of the price limit order in cryptocurrency. I believe you will understand it after reading it. In short, investment involves many variables, but it is not necessary to be intimidating at the beginning. Developing an investment plan that combines your short-term and long-term goals can help streamline the process. In addition, it is important to understand how various order types and other transaction aspects can help you optimize your profits and bring risks. Limit orders are useful when you want better control over the price at which you buy shares and the price at which you are prepared to sell them. The limited order is beneficial for novice investors to learn from the stock market, and also for those investors who hold large shares in the game.