Market Orders vs Limit Orders

Understanding Order Types

When you buy or sell cryptocurrency, you submit an “order” to the exchange. The type of order determines how and when your trade executes. Choosing the right order type can save you money and help you trade more effectively.

Market Orders

A market order executes immediately at the current best available price.

How Market Orders Work

1. You click “Buy” or “Sell”
2. Exchange matches you with existing orders
3. Trade executes instantly
4. You get current market price

When to Use Market Orders

• Need to buy/sell immediately
• Trading liquid assets (BTC, ETH)
• Small orders
• Don’t mind slight price variation

Market Order Advantages

• Instant execution: Trade happens immediately
• Guaranteed fill: Your order will complete
• Simplicity: Just click buy or sell
• Best for urgent trades: Time-sensitive situations

Market Order Disadvantages

• No price control: You take what’s available
• Slippage: May get worse price than expected
• Higher fees: Often more expensive than limit orders
• Spread cost: Pay the bid-ask spread

Market Order Example

You want to buy 0.1 BTC immediately:

• Current ask price: $70,050
• You place market buy order
• Order fills at $70,050 (or close to it)
• Trade complete in seconds

Limit Orders

A limit order only executes at your specified price or better.

How Limit Orders Work

1. You set your desired price
2. Order goes in the order book
3. Waits until price reaches your level
4. Executes when matched

When to Use Limit Orders

• Want a specific entry/exit price
• Not in a rush
• Trading less liquid assets
• Larger order sizes
• Minimizing trading costs

Limit Order Advantages

• Price control: You choose exact price
• Lower fees: Maker fees often cheaper
• No slippage: Get your price or nothing
• Strategic trading: Set and forget

Limit Order Disadvantages

• May not fill: Price might never reach your level
• Partial fills: Only part of order may execute
• Requires patience: Must wait for price
• Opportunity cost: Might miss trades

Limit Order Example

You want to buy Bitcoin at $68,000:

• Current price: $70,000
• You place limit buy at $68,000
• Order sits in order book
• If price drops to $68,000, order fills
• If price never reaches $68,000, order stays open

Market vs Limit: Quick Comparison

Feature	Market Order	Limit Order
Execution	Immediate	When price reached
Price Control	None	Full
Guaranteed Fill	Yes	No
Fees	Usually higher	Usually lower
Best For	Urgent trades	Strategic entries

Stop Orders

A stop order triggers when price reaches a specified level.

Stop-Loss Order

Automatically sells when price drops to limit losses.

Example:

• You buy BTC at $70,000
• Set stop-loss at $67,000
• If price drops to $67,000, automatic sell triggers
• Limits your loss to ~4%

Stop-Limit Order

Like stop-loss, but executes as limit order instead of market.

How it works:

1. Price reaches stop price
2. Limit order activates at your limit price
3. Order fills only at limit price or better

Advantage: Price control Risk: May not fill in fast-moving markets

Setting Stop-Loss Levels

Common approaches:

• Percentage-based: 5-10% below entry
• Support levels: Below key technical levels
• Volatility-based: Based on asset’s typical moves
• Fixed dollar amount: Maximum loss you’ll accept

Take-Profit Orders

Automatically sell when price rises to lock in gains.

How Take-Profit Works

1. You buy at $70,000
2. Set take-profit at $77,000 (10% gain)
3. When price hits $77,000, sell triggers
4. Profits automatically secured

Take-Profit Strategies

Single target:

• One price target
• All position sold at once

Scaled targets:

• Multiple take-profit levels
• Sell portions at each level
• Example: 25% at +10%, 25% at +20%, 50% at +30%

Advanced Order Types

OCO (One-Cancels-Other)

Two orders linked together - when one fills, the other cancels.

Common use: Stop-loss + take-profit

• If take-profit fills, stop-loss cancels
• If stop-loss fills, take-profit cancels

Trailing Stop

Stop-loss that moves with the price.

Example:

• Buy at $70,000
• Set 5% trailing stop
• Price rises to $77,000, stop moves to $73,150
• Price falls to $73,150, sell triggers
• Locked in some profit automatically

Iceberg Orders

Large order broken into smaller visible pieces.

Purpose: Hide true order size Used by: Large traders, institutions Availability: Advanced exchanges

Post-Only Orders

Guarantees your order is maker (adds liquidity).

Benefit: Lower fees, no taker fee Risk: May not fill if price moves

Time-in-Force Options

How long order stays active:

Type	Duration	Use Case
GTC	Until cancelled	Most common
Day	Until end of day	Day trading
IOC	Instant or cancel	Quick fills
FOK	Fill all or nothing	Large orders

Order Types by Exchange

Binance

• Market, Limit, Stop-Limit
• OCO orders
• Trailing Stop (Futures)
• Post-Only

Coinbase

• Market, Limit
• Stop orders
• Advanced order types on Pro

Kraken

• Market, Limit
• Stop-Loss, Take-Profit
• Trailing Stop
• Iceberg orders

Practical Trading Scenarios

Scenario 1: New to Crypto

Goal: Buy first Bitcoin

Approach:

1. Use market order for simplicity
2. Small amount ($100-500)
3. Don’t worry about perfect price
4. Focus on learning the process

Scenario 2: Long-Term Investor

Goal: Accumulate Bitcoin monthly

Approach:

1. Use limit orders slightly below market
2. Set and forget
3. If doesn’t fill, use market order
4. Dollar-cost average over time

Scenario 3: Active Trader

Goal: Trade Bitcoin swing

Approach:

1. Limit order for entry at support level
2. Set stop-loss 5% below entry
3. Set take-profit at resistance
4. Use OCO for automated exit

Scenario 4: Large Purchase

Goal: Buy $50,000 of Bitcoin

Approach:

1. Split into multiple smaller orders
2. Use limit orders at slightly different prices
3. Execute over hours/days
4. Minimize market impact

Common Mistakes to Avoid

With Market Orders

• Using on illiquid pairs (high slippage)
• Large orders on thin order books
• During high volatility periods

With Limit Orders

• Setting unrealistic prices
• Forgetting about open orders
• Not adjusting to market conditions

With Stop Orders

• Stop too close (stopped out by noise)
• Stop too far (excessive loss)
• Not using stops at all

Fees and Order Types

Order types affect your fees:

Maker vs Taker

Maker: You add liquidity (limit orders that don’t fill immediately)

• Lower fees (often 0.02-0.1%)
• Your order waits in the book

Taker: You remove liquidity (market orders, limit orders that fill immediately)

• Higher fees (often 0.04-0.15%)
• Your order fills existing orders

Fee Comparison

Exchange	Maker Fee	Taker Fee
Binance	0.1%	0.1%
Kraken	0.16%	0.26%
Coinbase Pro	0.4%	0.6%

Order Type Strategy

Build Your Framework

1. Entry orders: Limit orders for better prices
2. Protection: Always use stop-loss
3. Exit strategy: Take-profit at target levels
4. Flexibility: Market orders for urgent situations

Example Full Trade Plan

1. Asset: Bitcoin
2. Entry: Limit buy at $68,000
3. Stop-loss: $64,000 (6% risk)
4. Take-profit: $78,000 (15% target)
5. Risk/Reward: 1:2.5 ratio

Practice First

Before using real money:

• Paper trade to learn order types
• Use very small amounts initially
• Understand each order type
• Test stop-loss execution
• Learn your exchange’s interface

Next Steps

1. Understand Trading Fees: Minimize costs
2. Learn DCA Strategy: Long-term approach
3. Compare Exchanges: Find best platform
4. Security First: Protect your account

Quick Reference Card

Want To…	Use This Order
Buy/sell now	Market
Buy/sell at specific price	Limit
Limit losses	Stop-Loss
Lock in profits	Take-Profit
Automated exit strategy	OCO
Trail rising prices	Trailing Stop

Master order types to trade smarter, not harder. Start with market and limit orders, then add stop-losses, and eventually explore advanced orders as you gain experience.