When trading cryptocurrency, the type of order you place determines how and at what price your trade is executed. Understanding the difference between a limit order and a market order, and knowing when to use each, is a useful part of investing in cryptocurrency. This guide explains how both order types work, compares some advantages and disadvantages, and introduces a third type: the stop order.
The information presented here does not constitute financial advice but is for educational purposes only. Nothing on this page should be considered personal financial advice or a recommendation to invest. Past performance is not a reliable indicator of future results. Please do your own thorough research or consult a professional to better assess the risks of investing in cryptocurrencies.
A market order is executed immediately at the current market price, while a limit order is only executed when the market reaches a predetermined price.
Slippage is the difference between the expected and actual execution price, and can occur with market orders, especially in volatile or low-liquidity markets.
Stop orders may help manage risk in some situations by activating trades only once a certain price level is reached, but do not guarantee limiting losses and can execute at worse prices due to slippage/gapping.
Market orders suit fast execution, while limit orders are better for planned trades and precise pricing.
A market order is an instruction to the broker to buy or sell a security, like cryptocurrency, immediately at the best available price at the time the order is placed. It is the most straightforward of the common order types: when you submit a market order, it is executed as quickly as possible at the current market price.
Market orders prioritise the speed of execution over the exact price you receive. This option may be suitable in situations where the speed of purchase is more important than the price. Traders who want to enter or exit a position without waiting for a specific price level might consider this option.
When you submit a market order to buy a cryptocurrency, the platform matches your order against available sell orders in the market at that moment. The transaction completes at the best available price.
For example:
Let’s say the market price of one Bitcoin (BTC) is £57,000.
You place a market order to buy 0.1 BTC.
The order is executed immediately at the best available price, which may be slightly or significantly different from the price displayed, depending on current market conditions.
The difference between the price displayed when you place the order and the price at which it is executed is known as slippage. In markets with high trading volume and liquidity, slippage is often small. In markets with lower trading volume or during periods of high volatility, slippage can be more significant.
Advantages of market orders:
executed quickly and with a high likelihood of being filled
simple to use and easy to understand
reliable execution in markets with sufficient liquidity
Disadvantages of market orders:
the exact price at which the order is executed cannot be controlled
slippage can result in a less favourable price, particularly in volatile or low-liquidity markets
less suitable when precise pricing is important
A limit order is an instruction to a broker or exchange to buy or sell a cryptocurrency only at a specific price, or at a better price. Unlike a market order, a limit order gives you control over the price at which your trade is executed.
A limit order will only be filled if the market reaches the price you specify. If the market does not reach that limit price, the order remains open until it is filled, cancelled, or expires.
There are two types of limit orders: a buy limit order and a sell limit order.
Buy limit order: You specify the maximum price you are willing to pay for a cryptocurrency, and the order is only executed if the price drops to that limit price or below.
Sell limit order: You specify the minimum price at which you are willing to sell, and the order is only executed if the price rises to that limit price or above.
For example:
Say the cryptocurrency Bitcoin (BTC) is currently trading at £57,000.
You place a buy limit order at £54,000.
The order will only be executed if Bitcoin's price falls to £54,000 or below.
If the price does not reach £54,000, the order remains open until you cancel it or it expires.
Advantages of limit orders:
You control the exact price at which your trade is executed.
Useful for planning trades in advance without needing to monitor the market continuously.
Can help reduce the impact of short-term volatility on your execution price.
Disadvantages of limit orders:
The order may not be filled if the market does not reach your specified limit price.
Requires more upfront decision-making compared to a market order.
In rapidly moving markets, the price may briefly reach your limit and then move away before the order is filled.
The table below summarises the main differences between a limit order vs a market order.
| Feature | Market Order | Limit Order |
|---|
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Sign up hereA stop order, sometimes referred to as a stop-loss order, is a type of conditional order that becomes active only once the price of a security reaches a specified level, known as the stop price. Stop orders are commonly used to help manage risk by limiting potential losses.
Similar to a limit order, a stop order has a predefined price (the stop price) which must be reached before the order becomes active. Like a market order, however, it does not guarantee execution at a specific price. Once the stop price is reached, the order is triggered and executed as a market order at the next available price, which may differ from the stop price.
A stop-loss order is typically placed below the current market price to protect an open position from further losses if the price falls.
For example:
You hold Ethereum (ETH), which you bought at £1,500.
You set a stop-loss order at a stop price of £1,200.
If Ethereum's market price falls to £1,200, the stop order is triggered.
The order then executes as a market order at the next available price, which may be slightly below £1,200 depending on market conditions.
The risk with a stop-loss order is that in fast-moving or low-liquidity markets, the execution price can differ noticeably from the stop price.
A stop-limit order combines elements of a stop order and a limit order. It has two price levels:
Stop price: The price at which the order becomes active.
Limit price: The minimum price at which the order will be executed.
Once the stop price is reached, the order becomes a limit order rather than a market order. This gives you more control over the execution price, but it also means the order may not be filled if the market moves quickly past your limit price.
The table below compares the main trading order types across key criteria.
| Feature | Market Order | Limit Order | Stop Order | Stop-limit order |
|---|
Note: Stop orders and stop-limit orders are described here for educational purposes. Please refer to Bitpanda for information on which order types are currently available to UK users.
Neither a limit order nor a market order is inherently better than the other. The most suitable choice depends on your individual circumstances, your approach to investing, and the conditions of the market at the time you want to trade.
A market order may be considered by some traders in circumstances where:
You need to execute a trade immediately.
The cryptocurrency you are trading has high liquidity.
The difference between your target price and the current market price is not significant to you.
A limit order may be considered by some traders in circumstances where:
You have a specific target price in mind for your trade.
You are prepared to wait for the market to reach your specified limit price.
You want to reduce the risk of buying or selling at an unfavourable price due to volatility.
It is important to remember that all cryptocurrency trading carries significant risk. Prices can be highly volatile and move rapidly. Past performance is not a reliable indicator of future results. No order type removes the inherent risk associated with investing in cryptocurrency.
Looking to get started with limit orders? Bitpanda offers limit orders for crypto trading in the UK. Whether you're on desktop or mobile, you can set a specific limit price for your buy or sell orders directly.
To use a limit order on Bitpanda:
Log in to your Bitpanda account.
Select the cryptocurrency you wish to trade.
Choose the limit order option from the available order types.
Enter your desired limit price and the amount you wish to buy or sell
Review and confirm your order.
Please note that fees, limits, and conditions may apply. Refer to the Bitpanda app or website for full details. Do not invest unless you’re prepared to lose all the money you invest.
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Get started nowWant to learn more about cryptocurrencies? In the Bitpanda Knowledge Hub, you’ll find a wide range of guides and tutorials explaining the basics:
We answer common questions about limit and market orders
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