Investing in cryptocurrency has become a common topic of discussion, not only in India but globally. From the introduction of Bitcoin in 2009, the crypto space has enjoyed a lot of new inclusions thanks to the sector being only a decade old and also holding the potential of disrupting the finance sector as we know it.
The mass adoption of cryptocurrencies has also propelled the demands from traders to include various trading options on crypto exchanges. Given the various applications of cryptocurrencies, introducing various trading options has been a challenge the crypto exchanges have gladly taken up. In this article, let us understand what Limits Orders in crypto trading is!
A limit order is a type of order where you decide a price limit or parameters for buying and selling cryptocurrencies of your choice. For example, if you set a limit to your buy orders, the order will be executed only at the limit price set by you or a price even lower than your set one, but for limits set for sell orders, will be executed starting from the limit price or a price higher than the one set by you. These preconditions set by traders allow them to better control the prices they trade.
The most advantageous aspect of Limit Order is the trader gets to execute a trade when the price is right for them. The trader gets to pre-determine the rate by when they want to buy or sell the cryptocurrency. Other benefits of Limit Orders are:
To understand how Limit Order works, let us take an example. A trader wants to buy Bitcoin at a specific price. To avail Limit Order, they will place a limit order for Bitcoin at that particular price. That means if the trader would like to buy 1 Bitcoin (BTC) when its price falls down to INR 35,00,000, the trader will set the limit price to INR 35,00,000. On the other hand, if the trader would like to sell when Bitcoin reaches INR 45,00,000, then the limit price should be set to INR 45,00,000 on the sell-side.
Note: If the price is set higher than the current price for buys or lower for sells, it may result in an immediate fill as there is a better price available than the limit price specified.
The usage of Limit Order is not devoid of any disadvantage. One of the points to remember in limit order is that if the limit price is not met by an interested buyer or seller, the order has a chance to not be filled.
Additional Read: Limit Orders vs Market Orders
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