There are various methods to place buy and sell orders for cryptocurrencies, just like there are in conventional stock market exchanges. However, it's important to understand how each one operates. A variety of trade kinds are available to traders, allowing them to profit from market volatility or hedge against it. When venturing into crypto exchange development, it is necessary to provide maximum order options to enhance user experience. This article will explain the main crypto order types: basic, advanced, and conditional.
Order Book
The word order is used in financial markets by the investor to buy or sell investments, which may be in any form such as securities, bonds, cryptocurrencies, etc. In specific, crypto orders exist to exert some control over how crypto transactions are handled on a crypto exchange platform.
Here is a list of the different kinds of crypto orders that we must integrate when developing a crypto exchange platform.
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Basic Orders
The following are the most typical kinds of crypto orders:
Market Order
The simplest type of order to carry out a cryptocurrency buy or sale is a market order. These orders only specify the number of cryptocurrencies that a user wants to buy or sell immediately. The price at which they get executed will be the best one at the time. You cannot execute market orders with any order condition.
Limit Order
When a user executes a limit order to buy, the order book buys the cryptocurrency at the set limit price or a lower price. When a user executes a limit order to sell, the cryptocurrency is sold at the limit price or a higher price.
Limit orders come in use to buy or sell cryptocurrencies when the market price reaches a specified value. Limit orders become executable only when the market hits the specified limit.
Stop Orders
Stop orders are similar to limit orders, but become market orders once the pre-specified price, i.e. stop price, is reached. These types of orders – sell-stop orders/buy-stop orders help protect profits and limit losses of the trader. The stop price of the sell stop order is lower than the market price, and the stop price of a buy stop order is above the market price.
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Advanced Order Types a Crypto Exchange Should Have
Conditional Orders
The criteria listed below link various orders together for a variety of purposes. Although they are made up of order types from the Basic and Advanced parts above, conditional orders are also regarded as order types.
One Cancels the Other | OCO
Orders that are OCO (one cancels the other) arrive in pairs, and when one is executed, the other is also immediately canceled.
An example of an OCO
A trader may set up their stop loss and take profit orders as an OCO order if they have an open long account. This would enable them to simultaneously have two exit orders open without running the chance of the second order executing after the first order closes the position. For instance, the stop loss would be immediately canceled if the take profit was triggered.
One Sends the Other | OSO
OSO (One Sends the Other) orders, also referred to as conditional closes, activate a secondary order only in the event that the main order executes.
OSO Example
A limit order can be put in to start a position by a trader who is new to the market. When their limit order is executed, they can use an OSO/conditional close order to immediately open a stop loss. The stop loss could fill before the limit order, leaving them in a bad trade, if they were to file both orders normally.
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OCA | One cancels all
The OCA (One cancels all) order type lets traders program multiple (3 or more), potentially unrelated orders as a group with the effect that when one order executes, all others are automatically canceled. If one of the orders can only be partially filled, the other orders will remain open and adjusted to include the remaining value of the partially filled order.
Example of an OCA
If submitted through a brokerage, a trader can use this order type to spread their budget across multiple asset types (most cryptocurrency exchanges require an order to be submitted to a single market). A trader may also use OCA orders to attempt multiple entries into/exits out of a single market.
One Cancels all | OCA
When three or more possibly unrelated orders are programmed as a group using the OCA (One cancels all) order type, all of the other orders are automatically canceled when the first one executes. The other orders will stay open and be modified to reflect the remaining value of the partially filled order if one of the orders can only be partially filled.
OCA Example
This order form can be used by a trader to allocate their budget among various asset classes if filed through a brokerage. (most cryptocurrency exchanges require an order to be submitted to a single market). OCA orders can also be used by traders to make numerous attempts at entering and exiting the same market.
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Fill options
These are add-ons to an order that place restrictions on how the transaction can be filled.
Fill or kill / All or none
If a Fill or Kill order cannot be fully performed, it is either immediately canceled or partially executed.
Post limit / Post only
By doing this, the purchase is kept from posting to the incorrect side of the order book. This choice is used by traders to guarantee that at least a portion of their limit order is filled as a "maker" order.
Reduce only
Restricts the order's execution so that it can only be carried out if it will end a position or lessen its open volume. A reduce-only transaction is canceled if doing so would open a position or make it larger.
IOC — Immediate or cancel
IOC (Immediate or cancel) orders require that as much of the order's volume is bought or sold as soon as feasible. Any sum left blank is canceled.
Iceberg / Hidden Orders
Iceberg orders, also known as hidden orders, split a big order size into multiple limit orders of the same size. Over time, each equal part is separately offered to the market. The purpose of an Iceberg/Hidden Order is to conceal the real order quantity because occasionally, the presence of large orders in the order book can have an impact on an asset's price.
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What's Next
When developing a crypto exchange, we must ensure an efficient user experience. That requires a thorough understanding of crypto order types. Knowing the trading tools at your disposal is crucial, whether a user wants to use stop orders to reduce the possibility of loss or OCO orders to prepare for multiple outcomes at once.
You may connect with our skilled crypto exchange developers if you have a project in mind and want to integrate these crypto order types.
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