Crypto Order Types: What Are Market, Limit and Stop-Limit Orders?

An order is an instruction to a platform to buy or sell. It states the asset, the direction, the quantity and any price or time condition.

The US Securities and Exchange Commission's investor bulletin describes three basic types: market, limit and stop orders. It notes that order types and their names can differ between brokers, a caution that also applies to crypto platforms. Crypto platforms may also offer conditional orders such as stop-loss, trailing stop and exit orders at a favorable price; which ones are offered is set out in the platform's documentation.

A market order is matched at once against resting orders in the order book. If the first price level cannot cover the full quantity, the rest fills at the following levels. That gap is called slippage. The investor bulletin notes that the fill can differ from the last traded price and that parts of a large order can fill at different prices. How much slippage occurs depends on the order size and on the liquidity resting in the book.

Some platforms apply a safeguard that rejects a market order when the price gap passes a set threshold; the threshold and the rule are in the platform's own documentation. The known way to limit slippage is a limit order: it does not fill at a price worse than the one set.

A limit order fills at its stated price or better: a buy limit at or below its limit price, a sell limit at or above it. This sets a ceiling or a floor on the price, but in return the fill is uncertain. If the price never reaches the limit, the order waits and may never fill.

On some platforms the amount of an unfilled order stays unavailable until it fills or is cancelled. A buy limit above the market price, or a sell limit below it, fills at once and so may pay the taker fee instead of the maker fee.

The post-only option (adds liquidity only) prevents this: an order that would match at once is cancelled instead of filled, so it rests in the book and pays the maker fee.

A stop order activates when the price reaches its stop price, which is only a trigger. Once triggered, it becomes a market order, and the fill can differ clearly from the stop price. A sell stop works when the price falls to the stop level.

A stop-limit order has two prices. At the stop price it becomes a limit order that fills only at the limit price or better. Its advantage is price control; its cost is the risk of no fill if the price moves away from the limit. The two prices need not be equal: in the investor bulletin's example, a sell stop-limit with a 3.00 stop and a 2.50 limit activates at 3.00 but fills only at 2.50 or above.

The trigger also depends on the platform. The bulletin notes that some venues use the last traded price and others the bid and ask quotes. On crypto platforms too, the trigger measure (the last traded price or a reference price the platform defines) is set out in the platform's rules. Orders that close a position at a favorable price work the same way, but trigger when the price moves in the holder's favor.

Orders can carry a time condition. The investor bulletin lists day orders; good till cancelled (GTC) orders; immediate-or-cancel (IOC) orders, which cancel any unfilled part at once; and fill-or-kill (FOK) orders, which are cancelled in full unless they fill at once. Which time options a crypto platform offers depends on its rules.

Crypto markets have no daily closing time. The European Central Bank's 2019 bulletin says this market runs 24 hours a day with no standard closing time. Read an order's validity from the platform's time options.

A trailing stop order has no fixed stop price. It stays a set percentage or amount from the market price: it follows the price in the holder's favor and stays put against it. Some platforms group orders, such as a one-cancels-the-other pair, or a bracket order that places stop-loss and favorable-price exit orders once the entry fills.

Each order type fixes one thing and leaves another uncertain:

• Market order: the fill is targeted; the price is uncertain, and slippage can occur.
• Limit order: the price is capped; the fill is uncertain and may never happen.
• Stop order: the stop price is only the trigger; the trade price can differ clearly from it.
• Stop-limit order: the price is capped, but after triggering the order may not fill, leaving the position open.

The Commodity Futures Trading Commission's customer alert lists sudden price swings and flash crashes among crypto market risks. The investor bulletin states that a stop order's execution price can differ clearly from the stop price, depending on demand and liquidity, and that a stop-limit order may not fill because of its limit.

Together, the warnings mean that in a fast fall a stop order can fill far from its trigger, and a stop-limit order may not fill at all. A stop level is therefore a trigger, not a fixed limit on the loss.

Lzzo.com is neither a broker nor a trading platform, and it does not route orders. The position size and risk/reward calculator shows the arithmetic before an order. From the account size, risk percentage, entry and stop-loss levels, it calculates the number of units, the risk amount and the risk/reward ratio.

The page warns that the calculation assumes the stop-loss is executed at the chosen price. Price gaps, slippage and commissions can increase the loss, the same risk as with a stop order. The crypto list and the Bitcoin page show prices with an observation time, but they are no substitute for a platform's order book.