Order Types, Explained

Order Types, Explained

Market orders, limit orders, time-in-force instructions and more — all explained in detail for beginning traders.

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Stop orders are similar to, but distinct from, limit orders. Where limit orders are actually on the order book, stop orders are only placed when the predefined price is reached, and they can be used in conjunction with market or limit orders.

The distinction is subtle, but the key difference is that limit orders are already placed on the order book and can be seen by anyone, while stop orders aren’t even submitted until the conditions are met. They can be set up to place a market or limit order, which can give traders increased flexibility.

Basically, a stop market order says, “If the price reaches X, buy/sell immediately.” This doesn’t mean you will necessarily get the price of X, but when that price is reached, a market order is immediately placed to buy at the best current price. Alternatively, a stop-limit order says, “If the price hits X, place an order to buy/sell at Y.” Note that X and Y can be the same price, but they don’t have to be. So, you could theoretically have a trade that goes, “If Bitcoin hits $10,000, place an order to buy it, but only at the price of $10,000.” Alternatively, you could set it up as follows: “If Bitcoin hits $10,000, place an order to buy it, but only at $10,100.” By combining these layers of instruction, traders can create complex strategies and manage risk more effectively.


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Market orders, limit orders, time-in-force instructions and more — all explained in detail for beginning traders.

Derivatives in Crypto, Explained

Derivatives in Crypto, Explained

Financial derivatives are one of the oldest types of contracts on the financial markets. How can they be applied to the crypto industry? #SPONSORED

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4.

Cryptocurrencies are increasingly gaining popularity, and there are more traders who want to benefit from price fluctuations. 

Bitcoin’s rate has had a wild ride over the past two years — surging to its all-time high around $19,800 and then losing one-third of its value in just a few days, continuing to drop throughout 2018 to as low as $3,200. However, in April 2019, things started to change again, and the current price of Bitcoin — over $12,171, as of press time — is far from pessimistic. 

Bitcoin futures trading was launched by the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) during the peak of the crypto bull market in December 2017. The move was a huge milestone for the whole crypto industry, as a futures contract allows investors to hedge positions and reduce the risk of the unknown, which is quite relevant for cryptocurrencies. In other words, trading Bitcoin and altcoin futures enables major traders to mitigate their risks by signing a contract that settles directly to an underlying auction price of a particular cryptocurrency. 

Moreover, there are, obviously, many traders who want to benefit from those drastic changes by trading derivative contracts for Bitcoin and major altcoins. To make a profit from a sudden change in the underlying asset’s price, the trader can buy a cryptocurrency at a low price and sell it at a higher price later. However, this strategy is only relevant during a bull market and is quite risky, as are all other attempts to speculate on the price of the underlying asset.

Another strategy is called shorting, which is a way to profit even from a crypto bear market or a market that is currently experiencing a downtrend. To short, the traders usually borrow the assets from a third party — whether it be an exchange or broker — and sell them on the market when they expect the price to decrease. As the coin’s price goes down, the trader purchases the same amount of assets back for a lower price and profits from the price movement, while the exchange or the broker gets paid a commission.


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Financial derivatives are one of the oldest types of contracts on the financial markets. How can they be applied to the crypto industry? #SPONSORED