💡Limit Orders

In the realm of trading, mastering the art of precise execution is essential. One valuable tool at the disposal of traders is the limit order. In this article, we will explore what limit orders are, how they function, and why they are indispensable in trading.

Limit

Limit orders are specific instructions placed by traders to buy or sell an asset at a designated price or better. Unlike market orders, which are executed immediately at the prevailing market price, limit orders remain pending until the market reaches the specified price level. In essence, they act as triggers that activate a trade when the market conditions align with the trader's desired price.

For Long Positions: A limit order specifies the highest price at which you are willing to buy an asset. It's a way to ensure you don't pay more than your desired price. For example, if you want to go long on Bitcoin at $45,000, you can place a limit order at that price or lower. If the market reaches your specified price or dips below it, your order will be executed.

For Short Positions: In a short position, a limit order sets the lowest price at which you are willing to sell an asset. It allows you to establish a short position when the market reaches your desired price or goes higher.

Stop Limit

A Stop Limit order combines two key elements: a stop price and a limit price. It is a conditional order placed by traders to execute a trade at a specific price (the limit price) or better, but only after a certain price level (the stop price) has been reached or breached in the market. These orders provide traders with a high degree of control over their trade executions.

For Long Positions: A Stop L imit order combines elements of both stop and limit orders. First, you set a stop price (e.g., $48,200 for Bitcoin). If the market price rises to or above this stop price, your order becomes a limit order to buy at a specific price (e.g., $48,000). It's a way to ensure that you only buy if the market moves in a certain direction.

For Short Positions: In a short position, a Stop Limit order is used to manage risk. You set a stop price (e.g., $41,800 for Bitcoin), and if the market reaches or goes below this price, your order becomes a limit order to sell at a specific price (e.g., $42,000). This helps protect against potential losses by automatically triggering a sell order if the market moves against your short position.

Stop Market

A Stop Market Order is a powerful tool that is activated when a specified stop price is reached and executed at the current market price. It allows traders to react quickly to market changes by ensuring that a trade is executed when the market reaches or exceeds a set price threshold.

For long positions: This order allows traders to set a stop price to buy, which is particularly useful when forecasting a rise in the price of an asset. The order is activated when the market price reaches or exceeds the stop price, allowing the trader to enter the market at the early stages of an expected uptrend.

For short positions: In the context of short positions, the order is used to set a sell stop price to protect against potential losses if the price of the asset is expected to fall below a certain level. When the market price of the asset reaches or falls to the stop price, the order is executed, minimising losses or locking in profits.

Unlike a stop-limit order, which requires a stop and limit price to be specified, a stop-market order is executed immediately at the market price upon activation. This makes it ideal for traders who want to react quickly to market fluctuations without the risk of delays.

Order expirations

All orders, including stop limit orders, are subject to an expiration period, set at 60 days. This expiration period serves several crucial purposes. Firstly, it helps maintain smart contract efficiency by preventing the accumulation of stale and inactive orders that are no longer relevant to current market conditions. Secondly, it encourages traders to review and update their trading strategies regularly, adapting to evolving market dynamics. By setting a reasonable expiration period, traders are prompted to reassess and refine their positions, ensuring that their orders remain in line with their current objectives. This practice ultimately contributes to a more dynamic and responsive trading environment, benefiting all participants in the markets.

Note: Order execution occurs only if the full order volume is available for open interest. Additionally, the initialization of order execution may take up to 20 seconds after the conditions are met, and the speed of execution depends on the current load of TON blockchain network.