EXCHANGES & TRADING

Order Types Explained: Market, Limit & Stop Orders

What are Order Types?

Order types are the language of the order book. They determine how and when your trades are executed and how much control you have over price and speed.

A market order instructs your broker to buy or sell immediately at the best available price, prioritising speed but sacrificing price control.

A limit order specifies the maximum price you’re willing to pay or the minimum price you’re willing to accept, giving you control over the execution price but with no guarantee of execution if the market never reaches your limit.

Stop orders act as safety nets: they trigger once the market hits a predefined stop price and can help manage risk by exiting losing positions or entering breakouts.

Understanding these differences helps you avoid slippage, missed trades and emotional mistakes. Partner this with good risk management, & you’re setting yourself up for success. We recommend you check out “Understanding Risk Management” to level up.

Market Orders

A market order is the most straightforward type of order. It tells your exchange to buy or sell a cryptocurrency immediately at the best available price in the order book. Because execution is instant, market orders are ideal when you need to enter or exit a position quickly.

Benefits of Market Orders

Immediate execution: Market orders fill instantly, allowing you to capture opportunities without delay. They are well suited for highly liquid markets where the bid–ask spread is tight.
Simplicity: Placing a market order is easy; simply specify the quantity and let the exchange match you with the best available price.
High probability of fill: Unlike limit orders, market orders almost always execute because they match against existing orders in the book.

Drawbacks of Market Orders

Price slippage: In volatile or illiquid markets, the fill price may differ from what you see on the screen. Slippage occurs because your order “walks the book,” consuming available liquidity and potentially paying a higher price for buys or receiving a lower price for sells.
No price control: With a market order you accept whatever price the market offers at that moment. This lack of control can lead to overpaying or selling too cheaply.
Not ideal for large orders: Placing a large market order in a thin market can move the price significantly, increasing slippage and market impact.

Examples of Market Orders in Action

Suppose Bitcoin is trading around $50 000 USD on your exchange. You decide to buy 0.1 BTC immediately. A market order will fill at the best available ask; however, if liquidity is low the final price could be slightly higher than $50 000 USD due to slippage.

Limit Orders

A limit order allows you to set the exact price at which you want to buy or sell a cryptocurrency. Unlike market orders, limit orders are not executed immediately; they remain open until the market price reaches your specified level. This gives you more control over your entry and exit prices.

Benefits of Limit Orders

Price control: You decide the maximum price you’ll pay when buying or the minimum you’ll accept when selling. The trade only executes at your limit price or better.
Reduced slippage: By specifying a price, you avoid paying higher or selling lower due to market volatility.
Strategic entries and exits: Limit orders are excellent for buying dips below the current market price or taking profits above it.
Partial fills possible: If there isn’t enough liquidity to fill the whole order at once, exchanges may fill part of your limit order at the specified price and leave the remainder on the book.

Drawbacks of Limit Orders

No guarantee of execution: If the market never reaches your limit price, the order remains unfilled and you may miss opportunities.
Time sensitivity: In fast‑moving markets, your limit price may become obsolete quickly, requiring you to adjust or cancel the order.
Opportunity cost: A limit order may prevent you from entering a trade that could have been profitable at a slightly different price.

Examples of Limit Orders in Action

Imagine Ethereum is trading at $2,500 USD. You believe it might dip, so you place a buy limit order at $2,400 USD. Your order sits on the book and will fill only if the price reaches $2,400 USD or lower. If ETH never drops to that level, your order won’t execute.

Stop Orders

Stop orders are conditional instructions that become active only when the market hits a predetermined stop price. They are primarily used for risk management (stop‑loss orders) or breakout strategies (buy stop orders). There are two main types:

Stop‑Market Orders: When the stop price is reached, the order converts into a market order, guaranteeing execution but not price.
Stop‑Limit Orders: When the stop price is reached, the order converts into a limit order, filling only at the limit price or better.

Check out our full breakdown of how to manage Stop-Losses.

Benefits of Stop Orders

Risk management: Stop orders help you exit losing positions automatically at a predefined threshold, preventing larger losses.
Automation: You don’t need to monitor the market constantly; the order triggers automatically once the stop price is hit.
Strategic entries: A buy stop can be used to enter a trade once the price breaks above a key resistance level, signalling momentum.

Drawbacks of Stop Orders

Execution risk: A stop‑market order guarantees a trade but not the price. In fast markets, the fill could be far from your stop price, leading to slippage.
Non‑execution risk (stop‑limit): A stop‑limit order provides price control, but if the market moves past your limit price without filling, the order may remain open and you might sustain further losses.
Vulnerability to volatility: Sudden price spikes can trigger stops prematurely, especially if the stop price is set too close to current levels.

Examples of Stop Orders in Action

You hold 1 BTC at $40,000 USD. To limit potential losses, you place a sell stop‑market order at $38,000 USD. If the price drops to $38,000 USD, the stop order triggers and becomes a market order; your BTC is sold at the next available bid. Alternatively, you could set a stop‑limit by specifying a stop at $38,000 USD and a limit at $37,800 USD. The order will attempt to sell only at $37,800 USD or higher; if the market gaps below, the order may not fill.

When to Use Each Order Type

Choosing the right order type depends on your priorities; speed, price control or risk management.

Order type	Execution	Price control	Best use cases	Key risk
Market order	Instant fill at best available price	None	Entering or exiting quickly in liquid markets; capturing fast‑moving opportunities	Slippage; paying more or receiving less than expected
Limit order	Executes only if the market reaches your limit price	Full	Buying dips, selling rallies, trading volatile assets while controlling price	May not fill; opportunity cost
Stop‑market	Becomes a market order when stop price is hit	None after trigger	Setting stop‑losses to cap downside or using buy stops for breakout entries	Slippage; fill may differ from stop price
Stop‑limit	Becomes a limit order when stop price is hit	Partial (limit price sets minimum or maximum)	Risk management with price control; avoiding selling too low or buying too high	May not execute if price gaps past limit

Step‑by‑Step Guide to Placing Orders

While each exchange’s interface varies, the general process for placing market, limit or stop orders is similar (Make sure to select your chosen exchange prior to starting this step-by-step guide. If you’re still unsure which exchange is right for you, check out our “Best Crypto Exchanges in Australia for 2026” resource):

Choose your trading pair. Select the cryptocurrency pair you wish to trade (e.g. BTC/USDT). Make sure you understand the lot size and minimum order requirements.
Select the order type. In the order entry panel, choose Market, Limit, Stop‑Market or Stop‑Limit. Some platforms may label stop‑market as “Stop‑Loss” and stop‑limit as “Stop‑Limit.”
Set the price (if applicable). For limit orders, enter your limit price. For stop orders, enter both the stop price and, if using stop‑limit, the limit price.
Enter the quantity. Specify how much of the asset you want to buy or sell. Check that the total cost or proceeds align with your position sizing rules.
Review fees and slippage tolerance. Exchanges may display estimated fees and potential slippage. Ensure your order parameters reflect your risk tolerance.
Place the order. Click Buy or Sell. Your order will appear in the open orders tab until it fills or is cancelled.
Monitor and adjust. If using limit or stop orders, watch the market. Adjust or cancel orders if market conditions change or if they haven’t executed before your planned time horizon.

Tips & Best Practices

Consider liquidity. Use market orders primarily in high‑liquidity markets where spreads are tight; otherwise, slippage can be significant.
Don’t chase price. If a limit order fails to fill, avoid impulsively switching to a market order at unfavourable prices. Instead, reassess your strategy.
Place stops thoughtfully. Avoid setting stop‑losses at obvious round numbers or just below support levels where they may be triggered by normal market noise. Consider volatility indicators like ATR to position stops.
Combine orders. Advanced traders often use bracket orders or OCO (One‑Cancels‑Other) orders to set a profit target and a stop‑loss simultaneously, automating their trade management.
Review order history. Keep a trading journal detailing why you used a particular order type, the outcome and what you learned. This will refine your strategy over time.

Final Thoughts

Mastering order types is essential for successful crypto trading. Market orders prioritise speed but give up price control; limit orders prioritise price control at the cost of immediate execution; stop orders help manage risk by automating exits or entries based on price triggers. Understanding when and how to use each type allows you to balance speed, precision and protection in any market environment. Combined with sound risk management and clear trading plans, the right order type can be a powerful tool in your trading arsenal.