When you place a crypto trade, you choose an order type. The order type is the instruction that tells the exchange how, and at what price, to fill the trade, and the one you pick shapes both the price you get and whether the trade goes through at all. Here are the basics:
A market order fills straight away at the current price.
A limit order fills only at a price you set or better.
A stop order waits in the background until the price reaches a level you choose, then turns into a live order.
This guide takes each one in turn, shows where it fits, and closes with the considerations to weigh before you trade.
What is a market order?
A market order is an instruction to buy or sell straight away at the best price available. Speed is what it gives you, not a guaranteed price. The moment you place it, the exchange matches it against the orders already on the book and fills it at whatever the market is showing.
In a calm market with plenty of trading, that price sits close to what you saw on screen. In a fast or thin market the order can fill across several price levels at once, so the final price drifts from the one you expected. That drift has a name: slippage. The trade off is worth stating in full. A market order buys you certainty that the trade goes through, in exchange for less certainty over the price you pay.
What is a limit order?
A limit order turns that trade off around. It is an instruction to buy or sell only at a price you set or better, which puts price first and speed second. A buy limit fills at your price or lower, and a sell limit fills at your price or higher.
Rather than fill against the market at once, the order rests on the order book and waits for the market to come to your price. It might fill in full, fill in part, or never fill if the price does not reach the level you set. You gain control over the price you pay, and in return you accept that the order may sit open.
What is a stop order?
A stop order works in another way. It sits inactive until the price reaches a trigger you set, known as the stop price, and only then does it turn into a live order. Traders reach for it in two situations: to cap a loss on something they hold, or to enter a position once the price breaks through a level.
The first use is the stop loss. It sells your holding once the price falls to your stop price, which caps how much you stand to lose if the market turns against you. The second is the buy stop, which works the other way and buys once the price rises to your stop price, a way to join a move only after it clears a level.
Stop market versus stop limit
A stop order needs to know what to become when it triggers, and you have two choices.
Stop market: It triggers into a market order and fills at once. As with any market order, the fill price can move away from the stop price in a fast market.
Stop limit: It triggers into a limit order at a price you set. You keep control of the fill price, and you carry the same risk as any limit order, that it may not fill if the market runs past your limit.
What is a trailing stop order?
A trailing stop is a stop order that moves with the price. Instead of fixing the stop at one level, you set it a fixed distance below the market price, as a rand amount or a percent. As the price climbs, the stop climbs with it and keeps that distance. When the price falls, the stop stays where it is, and it triggers once the price has dropped your chosen distance from its peak. In effect it lets a position run while the price rises and steps in once the price turns.
Market, limit and stop orders compared
Set side by side, the three order types answer three different questions. A market order answers how fast. A limit order answers at what price. A stop order answers at what level to act. The table below summarises how each one behaves.
Order type | What it controls | Fills when | Main consideration |
|---|---|---|---|
Market | Speed of execution | At once, at the current market price | Fill price can differ from the price on screen in a fast or thin market |
Limit | The price you get | Only at your price or better | May not fill at all if the market never reaches your price |
Stop (stop market) | A trigger to act | Once the stop price is reached, then at the market price | Fill price can differ from the stop price in a fast market |
Stop limit | A trigger plus a price boundary | Once the stop price is reached, then only at your limit or better | May go unfilled after it triggers |
Trailing stop | A trigger that follows the price | Once the price falls your set distance from its peak | Fill price can differ in a fast market |
Considerations before you place an order
A few things hold true across all three order types, whichever one you choose.
Crypto prices move at all hours, so a price can change between the moment you decide and the moment your order fills.
Market orders trade price certainty for speed, limit orders trade speed for price certainty, and a stop order adds a trigger rather than a guaranteed fill price.
Thin trading or a fast market widens the gap between the price on screen and the price you get on a market or stop market order.
A stop order is not a guarantee. In a sharp move the market can gap past your stop price, so a sell can fill below the level you set.
The order type that fits comes down to what matters more on a given trade: getting filled, or getting a set price.
Frequently asked questions
What is the difference between a market order and a limit order?
A market order fills straight away at the current price, while a limit order fills only at a price you set or better and may not fill at all. Put simply, a market order favours speed and a limit order favours price.
What is a stop loss order?
A stop loss order sells a holding once the price falls to a stop price you set, as a way to cap how much you stand to lose if the market moves against you. In a fast market the fill can land below the stop price.
What is a stop limit order?
A stop limit order pairs a trigger with a price boundary. It stays inactive until the price reaches your stop price, then becomes a limit order that fills only at your limit price or better. That gives you control over the fill price, at the cost that it can go unfilled if the market moves past your limit.
Can an order fill in part?
Yes. A limit or stop limit order can fill in part when only some of it matches at your price. The rest stays open until it fills or you cancel it.
Is a trading stop order the same as a bank stop order?
No. In everyday banking, a stop order is a recurring payment instruction you set up with your bank to pay a set amount on a set date, which you control. A trading stop order is an instruction to buy or sell an asset once its price reaches a trigger level. They share a name and nothing else.
Which order type should I use?
There is no single answer, because the fit depends on what you want from a given trade. Some investors want the trade to go through and lean on a market order. Others want a set price and use a limit order. A stop order adds a trigger for entering or exiting at a level. The choice comes down to your own goals and how much price movement you are comfortable with.
