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Cryptocurrency Stop Limit Order

Introducing Stop Limit orders for the first time on an Indian digital asset exchange

We are bringing a couple of new features which we consider are important for users.

These days, FOMO has become very common in investors. FOMO (Fear of Missing Out) indicates the situation when the price of cryptocurrency shoots up or goes down and the investor may feel that he missed the chance to buy or sell the crypto coins.

Let's first understand a couple of terms before that.

What's a limit order:

A limit order is an order to buy or sell a cryptocurrency at a specific price or better. 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. A limit order is not guaranteed to execute.

What's a market order:

A market order is a buy or sell order to be executed immediately at current limit prices. As long as there are willing sellers and buyers, market orders are filled. Market orders are therefore used when certainty of execution is a priority over price of execution.

What's a stop order:

A stop order is an order to buy or sell a security when its price increases past a particular point, thus, ensuring a higher probability of achieving a predetermined entry or exit price, limiting the investor's loss, or locking in his or her profit. Once the price surpasses the predefined entry/exit point, the stop order becomes a limit order.

What's a stop limit order:

A stop-limit order requires the setting of two price points. The first point initiates the start of the specified action, referred to as the stop, while the second represents the outside of the investor's target price, referred to as the limit.

A stop order is an order that becomes executable once a set price has been reached and is then filled at the current limit price. A traditional stop order will be filled in its entirety, regardless of any changes in the current limit price as the trades are completed.

A limit order is one that is set at a certain price. It is only executable at times the trade can be performed at the limit price or at a price that is considered more favorable than the limit price. If trading activity causes the price to become unfavorable in regards to the limit price, the activity related to the order will be ceased.

By combining the two orders, the investor has much greater precision in executing the trade. A stop order is filled at the limit price after the stop price has been hit, regardless if the price changes to an unfavorable position. This can lead to trades being completed at less than desirable prices should the market adjust quickly. By combining it with the features of a limit order, trading is halted once the pricing becomes unfavorable, based on the investor's limit.

How it works on Bitbns?

The last traded price of XRP is 45 INR, and the resistance is around Rs. 46. If you think that the price will go higher after the price reaches the resistance, you can put a Stop-Limit order to automatically buy more XRP at the price of Rs. 47. This way you won't have to continuously watch market movements waiting for the price to reach your target price.

Please note: A maximum of 2 stop-limit orders are allowed for each trading pair at any point in time.

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References:

  • Investopedia 1 2
  • Wikipedia

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