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Binance Limit vs Market vs Stop Limit Order: Understanding the Difference

You have probably noticed that there are different types of orders that you can place when buying or selling some cryptocurrency on Binance? But you are not sure what is the difference between Limit vs Market vs Stop-Limit. And what is the best choice for you?

Let’s dive in together to figure out this difference.

Types of orders

All trades consist of at least two orders to make a complete trade:

  • one person places an order to buy Bitcoin (or any other coin)
  • another person places an order to sell that same Bitcoin

Every order type detailed below can be used to buy and sell securities. Both buy orders and sell orders can be used either to enter or exit a trade. If a trade is entered with a buy order, then it will be exited with a sell order. If a trade is entered with a sell order, the position will be exited with a buy order.

There are 3 main types of orders on Binance:

  1. Limit Order
  2. Market Order
  3. Stop-limit Order

You are only allowed for one position per trading pair at the same time. Let me explain this. If you open a short position, anticipating that the price will go down in the longer timeframe, but in the meanwhile wanted to open a long one to do a trade for a shorter timeframe. You won’t be able to open 2 positions in both directions at the same time. Opening positions in both directions would result in canceling one another out.

How can you open your order on Binance?

  1. Create your account. Don’t forget to utilize our referral link if you want to get up to 45% off of all your trading fees on Binance. Or you can just use our promo code N7HTYTIN during the registration.
  2. Fund your account with crypto you already have or with fiat money.
  3. Go to the Treading tab, select the coin you would like to buy or sell, pick up your type of order and place it.

Let’s take a closer look at each type of order you can select on Binance.

What is a limit order?

Limit orders are orders to buy or sell an asset at a specific price or better. This type of order may or may not be filled, depending on how the market is moving and where a trader sets the limit price. However, if they do get filled, it will always be at the price a trader expects (or at a better price than expected).

When should you use Limit orders?

You should use limit orders when you are not in a rush to buy or sell. In case you want to make sure that you get a suitable price, and you’re willing to risk the order not being completed at all.

You may also split your buy/sell order into many smaller limit orders, so you get a cost average effect.

What is a ‘better’ price?

It depends on whether the order is a buy or a sell order. For example, if a trader placed a limit buy order with a price of $100, the order would only get filled if the coin could be purchased for $100 or less. If you can’t find someone willing to sell to you for $100 or less, then the order won’t execute.

On the other hand, if you wanted to sell your crypto for $100 or more, you would place a limit sell order and set the price at $100. The order will only be executed if someone else is willing to buy this crypto from you for at least $100.

How to place a limit order?

  1. Register your Binance account. Don’t forget to use our referral link or promo code N7HTYTIN in order to save up to 45% on your trading fees.
  2. Fund your account
  3. Choose your crypto pair (e.g., BNB/BTC) and go to the trading page.
  4. Enter the price and the number of coins you want to sell/buy. You may also set the amount by clicking the percentage buttons, so you can easily place a limit sell order for 25%, 50%, 75%, or 100% of your balance.
  5. After that, you will see a confirmation message on the screen, and your limit order will be placed on the order book, with a small yellow arrow.
  6. Keep in mind that the limit order will only execute if the market price reaches your limit price. If the market price doesn’t reach the price you set, the limit order will remain open.

What is a market order?

A market order is an order to buy or sell cryptocurrency at the market’s current best available price. A market order typically ensures an execution but it does not guarantee a specified price. Market orders are optimal when the primary goal is to execute the trade immediately.

It needs liquidity to be filled, meaning that it is executed based on the limit orders that were previously placed on the order book.

Unlike limit orders, where orders are placed on the order book, market orders are executed instantly at the current market price, meaning that you pay the fees as a market taker.

Generally, market orders should be placed only during market hours. If this type of order is placed when markets are closed, it would be executed at the next market open. Which could be significantly higher or lower from its prior close. Between market sessions, numerous factors can impact a stock’s price:

  • release of earnings
  • company news or economic data
  • unexpected events that affect an entire industry, sector, or the market as a whole

When should you use Market order?

A market order is generally appropriate:

  • when you think the coin is priced right
  • when you are sure you want a fill on your order
  • when you want an immediate execution

In other words, you should favor this type of order when getting your order filled is more important than getting a certain price. It means that you should only use market orders if you are willing to pay higher prices and fees caused by the slippage.

How to place a market order?

  1. Create your Binance account. Use our referral link or promo code N7HTYTIN in order to save up to 45% on your trading fees.
  2. Fund your account
  3. Choose your crypto pair (e.g., BNB/BTC) and go to the trading page.
  4. Find the Market order tab, set the amount to 2 BNB, and click the Buy BNB button.
  5. A confirmation screen will pop up. Click “Buy/Long” if you confirm to place the order.
  6. Since market orders are executed right away, your market buy order will match the cheapest limit sell order available on the order book.

What is a stop-limit order?

A stop order is an order to buy or sell cryptocurrency at the market price once the crypto has traded at or through a specified price (the “stop price”). If the coin reaches the stop price, the order becomes a market order and is filled at the next available market price. If the coin fails to reach the stop price, the order is not executed.

The best way to understand a stop-limit order is to break it down into stop price and limit price:

  • The stop price is a price that triggers a limit order
  • The limit price is a specific price of the limit order that was triggered.

This means that once your stop price has been reached, your limit order will be immediately placed on the order book.

Although the stop and limit prices can be the same, this is not a requirement. In fact, it would be safer for you to set the stop price (trigger price) a bit higher than the limit price (for sell orders) or a bit lower than the limit price (for buy orders). This increases the chances of your limit order getting filled after the stop-limit is triggered.

When should you use a stop-limit order?

A sell stop order is sometimes referred to as a “stop-loss” order because it can be used to help protect an unrealized gain or seek to minimize a loss.

  • When a coin you own has risen and you want to attempt to protect your gain should it begin to fall
  • When you want to buy a coin as it breaks out above a certain level, believing that it will continue to rise

It may also be used to buy. A buy stop order is entered at a stop price above the current market price (in essence “stopping” the coin from getting away from you as it rises).

How to place a stop-limit order?

  1. Sign up for Binance. If you wish to save some money on your trading fees, we recommend using our referral link or promo code N7HTYTIN during your registration. It can help you save up to 45%. Don’t miss this unique opportunity!
  2. Fund your account
  3. Choose your crypto pair (e.g., BNB/BTC) and go to the trading page.
  4. Click on the Stop-Limit tab and set the stop and limit price, along with the amount of BNB to be sold.
  5. Click on the Sell BNB. A confirmation window will appear. Make sure everything is correct and press Place Order to confirm.
  6. Keep in mind that the stop-limit order will only be placed if and when the stop price is reached, and the limit order will only be filled if the market price reaches your limit price. If your limit-order is triggered (by the stop price), but the market price doesn’t reach the price you set, the limit order will remain open.

Limit vs Market vs Stop-limit

Market order
  • A market order is an order to buy or sell coins immediately.
  • It guarantees that the order will be executed, but does not guarantee the execution price.
  • It will generally execute at or near the current bid (for a sell order) or ask (for a buy order) price.
  • It is important to remember that the last traded price is not necessarily the price at which a market order will be executed.
Limit order
  • A limit order is an order to buy or sell a security at a specific price or better price.
  • A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher.
  • You may use limit orders to buy at a lower price or to sell at a higher price than the current market price.
Stop-limit order
  • Stop-limit orders are valuable as a risk management tool, and you should use it to avoid significant losses.
  • You may also set a stop-limit buy order to buy an asset after a certain resistance level is breached during the start of an uptrend.

Summary

By the end of this article, you should be able to tell the difference between limit and market and to make the right decision when you gonna place your next order.