Which Trading Order Should You Choose? All The Different Types Explained!

Hello guys, today I am going to talk about the different types of trading orders that you can use to buy/sell the financial assets you are interested in. Knowing all of these order types is particularly good for daytraders, but also good to know for longer term investors because when you want to cash out you want to use the right order type to get the best price when you sell!

The Market Order:

The first order type I will talk about is of course the simple Market Order. If you buy using a Market Order you will receive the amount of the financial asset which relates to the current price. If you are selling then you gain the current price multiplied by the amount of the asset you are selling. It is basically a "take what you get" type of order and so can be good if you just want to buy or sell really quickly.

The Limit Order:

Another order type is the Limit Order. Within this there are two sub-types; Buy Limit Orders and Sell Limit Orders. A Buy Limit Order is when you instruct the market to buy a specific amount of an asset below the current price and this order will only be filled at this set price or below. Therefore the Buy Limit Order is a good order type to allow you to get the best price possible. Obviously the price might never come down to your order level and so you have to be OK with the possibility of you not getting in on the action at all. A Sell Limit Order is simply the opposite; you place an order at a price above the current market price and this order will only be filled at this price or above. The Limit Orders are good to use if price has rallied/dropped a lot lately and so you want to buy/sell only after price has retraced a certain amount.

The Stop Order:

The third order type I want to explain is the Stop Order, and again there are two sub-types to this order; the Buy Stop order and the Sell Stop Order. For the Buy Stop Order, price is placed above the current price and therefore is only filled at this higher price or above. On the other hand, for the Sell Stop order, price is placed below the current price and so your order to sell will only be filled at this lower price or below. This order type is good if you are not confident yet of the direction of the market, and so you want to wait for price to break a support zone to sell, or a resistance zone before you buy.

The Stop Limit Order:

The last order type is the Stop Limit Order, and you guessed it, there are two types of this order; the Buy Stop Limit Order and the Sell Stop Limit Order. The Stop Limit Order is basically a combination of a Stop Order and a Limit Order. For a Buy Stop Limit Order you must decide on two prices above the current price, one being the Stop Order and once this price is reached your order turns into a Limit Order at a higher chosen price.

Example: BTC/USD is trading at $10,000 and you place a Buy Stop Limit Order with Stop Order price at $10,100 and Limit Order price at $10,200. If BTC/USD price goes above the $10,100 Stop Order price, the order turns into a limit order. For your buy order to be filled the market has to be able to fill your order at the Limit Order price ($10,200) or below. So if price was to go above $10,200 right away your order would not have been filled.

The Sell Stop Limit Order is the same just in the opposite direction. You would use this order type if you want to only buy/sell when the market has started moving seriously in your direction and you want more precise control over what price your order gets filled.

That's the end of the post guys, thanks for reading and if you learned something up-vote and follow me, I follow back!

Legal Disclaimer: I am not a Financial Adviser and so this is not professional financial advice. Do your own research beyond what you read in my blog posts and make your own decisions based on your beliefs about what to invest your money in and how to invest it.