Q. What is a Limit Order?
A:
A limit order allows you to place an order at a specific price or better. The order will only be executed when the market price reaches your limit price. This allows you to buy below the current market price or sell above it.
1. If the price meets or is lower than your limit, a limit buy order will be executed.
2. If the price meets or is higher than your limit, a limit sell order will be executed.
※ Unlike a market order that executes the trade immediately at the current price, a limit order gives you better control over the execution price. Since limit orders are executed automatically, you don’t have to constantly monitor the market and worry about missing trading opportunities. In most cases, limit orders result in lower fees. However, there is no guarantee that your limit order will be executed. If the market price never reaches your limit, your order will remain unfilled in the order book.
Q. How does a Limit Order Work?
A:
When you place a limit order, it is immediately added to the order book. However, it will not execute unless the price of the asset reaches or improves upon your specified limit.
Example: You want to sell 1 BTC at 30,000 USDT, but the current price is 28,000 USDT. You can place a sell limit order at 30,000 USDT. When the BTC price reaches 30,000 USDT or higher, your order will execute according to market liquidity. If you have other sell orders, those will be filled first, and then your limit order will be filled with the remaining liquidity.
Q. When should you use a Limit Order?
A:
1. You want to buy at a specific price lower than the current market price, or sell at a specific price higher than the current market price.
2. You are not in a hurry to buy or sell immediately.
3. You want to lock in unrealized profits or minimize potential losses.
4. You want to split your order into smaller limit orders.
※ Your order may not always be executed, as it depends on market conditions and liquidity. In some cases, your limit order may only be partially filled.
Q. What is a Market Order?
A:
A market order executes a trade immediately at the current market price. It allows you to buy or sell assets at the best available price based on the order book. This means you cannot be 100% certain of the execution price, and slippage may occur.
※ The main advantage of a market order is that it is quick, simple, and efficient, ensuring your trade is completed in most situations. However, there is the risk of slippage, and you must place the order yourself.
Q. How does a Market Order Work?
A:
Unlike limit orders placed on the order book, a market order will execute immediately at the current market price. The trade is matched between the buyer and seller in the order book.
As mentioned, a market order requires liquidity on the order book to satisfy immediate trading needs. Since market orders remove liquidity from the exchange, as a taker, you will often face higher fees.
Example:
1. You want to buy 0.1 BTC, and the current market price is around 24,900 USDT. You can go to the BTC/USDT trading pair, enter 0.1 in the quantity field, and place a market buy order. After placing the order, the exchange will match your buy order with the lowest limit sell order on the order book.
The lowest limit sell order is 24,900.6 USDT, with a quantity of 0.14432. Your market buy order will be matched at the 24,900.6 USDT price.
2. If you want to buy 0.5 BTC, but the cheapest limit sell order is insufficient to fill your entire market buy order, the remaining part of your market order will automatically match with the next best limit sell order. This process will repeat until the order is complete. This is why, as a taker, you may face higher prices and fees (or get lower prices).
Q. When should you use a Market Order?
A:
1. Market orders are easy to use. If you want to trade high liquidity tokens like BTC or ETH, a market order is a safe choice.
You can buy or sell the full amount of the asset you want. In most cases, a market order will ensure that you can quickly open or close all positions when needed.
2. If you are under time pressure to complete a trade, such as before market close, a market order is the fastest way to execute your trade.