Professional traders and investors place orders almost in a “blind mode” meaning they pay a little attention to what buttons do they click or what fields they have to fill in. They have all necessary skills and experience having months and even years of trading behind them. However, for many newcomers placing orders is a kind of “science fiction” as they are getting lost every time they open their exchange trading account.
We have decided to create a special complete guide, related to examples of cryptocurrency trading. Here we give you several illustrations of how to place orders and what types of trading position you can use when dealing with different exchanges.
Example of cryptocurrency platform
The first thing you see when you start trading with any crypto exchange is the platform. There are different types of websites with wide range of features. Let’s see the typical platform using an example of Bitfinex.
Here you can see several functional parts. The main is the chart where you can analyze quotation using different types of tools. Bitfinex offers Tradingview platform, which is one of the most popular nowadays. This type of chart allows traders to benefit from the most interesting and useful indicators. You can also switch between different timeframes, set the appearance of the chart.
However, there are some limitations here as the complete version of Tradingview also offers many different graphic tools including Fibo retracement, Pitchfork, trend line, horizontal levels, channels and some drawing tools.
If you need them badly, you can open Tradingview and conduct all analysis there. Once done, you can then switch browser window to your trading platform and place orders.
On the left side of the platform there is an area to place orders. We will get back to it once we are done with the description of all functional parts of a standard trading terminal.
Another important feature of any trading platform is Order Book. Here there are all orders that took place already. You can learn trading volumes from this window. There are bids and asks here. Those are the prices at which exchange clients are ready to sell and to buy cryptos.
It is to mention that there is no single market in cryptocurrency industry meaning different exchanges offer different prices. Those differences may be minor, but they exist. When you see an exact price in reviews, for example, this quotation is taken from one or another marketplace or are average, based on rates from different exchanges.
Now let’s get down to examples of cryptocurrency trading. Here there is a working area from Bitfinex platform.
Examples of Limit Orders
The first order type that you can use trading with Bitfinex is Limit. Here you can set the amount of the underlying asset to buy or sell. We have put one BTC. The system automatically calculates the amount of USD you need to pay in order to execute this trade.
Let’s say you want to buy one BTC. The price of this crypto is nearly $7,159.50 in the moment of writing meaning you have to pay this price for one Bitcoin. However, you are able to name your own price using Limit Orders meaning it may vary from the current exchange quotation.
Let’s suppose you want to buy BTC/USD for $7,000. You put this amount in the PRICE USD window and click on the Exchange Buy button. The order will be placed into the Book of Orders and wait for the price to reach this level before it executes.
One of the main features of this type of trades is that your order may be executed partially. Why does it happen? Mostly because of the nature of cryptocurrencies’ exchange trading. All trades are executed between website’s clients.
When there is an opposite order matching your requirements your trade will be executed. Let’s say you want to purchase one Bitcoin in exchange of USD at $7,000. You place an order and the system starts to look for other orders in the Book in order to find an opposite one matching your requirements.
Let’s suppose the system finds one, but a trader wants to sell 0.5 BTC for $7,000. The order will be executed partially in this case as you will purchase 0.5 Bitcoin instead of one. Once done, you are able to either wait for other opportunities or to cancel the order without reaching its final goals.
The same is for selling BTC/USD or any other asset. You put the amount of crypto you want to get rid of and the price at which you are ready to “shake hands” with the buyer. Once the system finds an opposite order matching your conditions (even if the buyer wants to purchase less amount of crypto).
Examples of Market Orders
Market Orders are similar to Limit ones but they are executed by current market price. Let’s see how it happens. You want to buy one BTC/USD. The current market price of the asset is $7,183.75 in the moment of writing. Once the order is placed, the system will automatically search for opposite trades matching your conditions.
As soon as it finds a seller who is ready to sell at this price, the order will be executed regardless of the amount meaning your trade may be done partially as well (and you will get less than one BTC).
However, there is a trick here as you may pay even higher than you planned as the system will search for cheaper prices first. If there are no such offers it will go through the Book of Orders and find the most appropriate ones even if their price is a bit higher than the market one at the moment.
Let’s get down tour example. The system finds 0.7 BTC at $7,183.75. However, this is a unique offer as the others want to sell their bitcoins at $7,200.00. You will buy the rest (0.3 BTC) at $7,200.00.
The same is with the Market Sell Orders. You need to choose the amount you want to purchase. The price appears automatically according to the best offers from the Book of Orders. Once placed, your order will be executed at best quotation. If the amount of the offer is less than your one, the system will search for others until it is done.
Examples of Stop Limit Order
This type of order is used by traders to open trades when the price moves fast in one or another direction. There are two main steps to place those positions – Stop Price and Limit Price. First, you indicate the Stop Price. This one activates the order.
The second step is to indicate Limit Price. This one opens the position. Why do traders use this type of trades? Professionals want their daily routine to be more autonomous. Sometimes during the serious price movement, it is almost impossible to “catch” the desired price.
Stop Price is often placed at certain important price levels. If the price crosses this level, it will eventually develop the progress and trader will be allowed to open trades at the desired level.
Let’s say a trader wants to buy one BTC/USD for $7,212.8. But the price is lower currently and is approaching a serious resistance level at $7,207.6. Trader places a Stop Limit Order with the following options: Stop Price level is at $7,207.6 (resistance area) and Limit Price at $7,212.8. Once quotation reaches $7,207.6, the order triggers. However, it remains in a “stand by” mode until the price reaches $7,212.8 level.
Example of Trailing Stop Order
This one is used by traders to protect their risks and close positions in case if the price goes the opposite to investor’s forecast direction. Some exchanges allow clients to use classic stop losses. Bitfinex and some of their competitors offer Trailing Stop Order that gives traders a more flexible tool to manage risks.
How does it work? Let’s say you buy BTC at $7,300 and place a Trailing Stop Order at $7,180. The difference between them is $120. This will be the distance at which Trailing Stop Order will “trail” the price. If the price moves to $7,400, Trailing Stop will move automatically at $7,280.
One thing to remember here is that Trailing Stop moves in one direction only. If you buy a crypto and places this type of order, it will follow the price when it goes upwards only. When it declines, Trailing Stop stays in place without any changes.
If the price declines towards this kind of stop order and reaches it, it triggers finally and the position is closed. Depending on the positions of the final price as compared to its position in the beginning of your trade, you can lose or earn some money.
Unlike Trailing Stop Orders, classic Stop Losses do not move automatically. Once placed, they remain at their position regardless of what is happening with the price. They are less flexible and sometimes need adjustments.
Example of Fill or Kill Order
This type of position means the order should be executed immediately at the current marketplace or removed. What is the main purpose of this order? It is created in order to allow traders to benefit from immediate position opening at the very same price.
What happens when an investor places a big long order? The price may start to grow and this order will be executed partially step-by-step with growing price. Fill or Kill allows you to be sure that you position be either opened entirely or “killed.”
Let’s say you want to buy 100 BTC/USD at $7,180. You place this Fill or Kill order. The system will automatically search for this amount at the exact price within the Book of Orders. Once successful, it executes the order. If not, the position will be canceled.
Example of Scaled Order
Scaled Orders are rare meaning they are offered by a limited number of exchanges. Those position types aimed to facilitate trader’s routine by helping him or her to place several orders within a certain price range.
Let’s say you want to buy BTC/USD within the $7,200 and $8,000 price range. You set the lower and the upper price, amount of BTC to buy (5 in our case), order count (the number of positions to open), and finally variances of price and amount. Once done, you can preview your set up by clicking on Exchange Preview button.
Those are the examples of cryptocurrency trading. We hope that you find this article useful as we had done a great work in gathering maximum information on all types of orders.