Order Types Demystified: Market, Limit, Stop, and OCO

Why Order Types Matter

Picking the right order type affects your fill price, fees, and risk. Here’s how they work in plain English.

Market Orders

• What: “Buy/Sell now” at the best available price.

• When to use: Small, urgent trades in liquid markets.

• Risk: Slippage—you may pay more/receive less than expected in thin books.

Example: You buy 2000 USDT worth of ETH instantly. If the order book is thin, the average fill could be 1–2% worse than the best quoted price.

Limit Orders

• What: You set the price; order executes only if the market reaches it.

• When to use: Patience + price control; often maker fees (cheaper).

• Risk: No fill if price never hits your limit.

Example: Place a limit buy at 2,900 when ETH trades at 2,950. If filled, you controlled the entry.

Stop & Stop-Limit Orders (Risk Control)

• Stop: Triggers a market order when price hits a level (fast exit).

• Stop-Limit: Triggers a limit order; avoids extreme slippage but might not fill during fast drops.

Example: You bought at 30,000 and set a stop at 29,000. If price falls, your sell triggers, containing losses.

OCO (One-Cancels-the-Other)

• What: Take-profit and stop-loss combined. When one fills, the other cancels.

• Why: Automates both outcomes—win or protect.

Example: Bought BTC at 30,000. OCO: Take-profit 31,200 and Stop-limit 29,200/29,100. If price rises to 31,200, take-profit fills; downside order cancels.

Practical Tips

• Use limit in low-liquidity pairs.

• Size orders to avoid moving the market.

• Always define risk (stop) before placing a trade.

• Consider maker/taker fees when choosing order type.

Key Takeaways

• Market = speed; Limit = control; Stop = protection; OCO = automation.

• Slippage and liquidity define your real outcome, not just the chart.

FAQs

Q1: Do OCO orders work on all pairs?
Support varies by exchange; check pair availability.

Q2: Why did my stop-limit not execute?
The limit might have been too strict during a fast move; the market never traded at your limit.

Q3: Are maker fees always cheaper?
Usually, but fee schedules differ—read your exchange’s table.