Market Order vs. Limit Order: When to Use Which in nftperp

Trading, whether it’s stocks, FOREX or NFT derivatives, is a risky endeavor. This skill set requires an understanding of the current market situation, knowledge of technical and fundamental analysis, and sometimes simply being available at the right time to execute trades.

Especially when it comes to the world of crypto trading, understanding the types of trade orders and when to use them is absolutely crucial for degen success. This article delves into the intricacies of trade orders, focusing on two primary types: market orders and limit orders. 

By comprehending these concepts, more of you degens can make informed decisions, optimizing your trading strategies in the volatile crypto market.

Trade Orders: Market Order vs Limit Order

A trade order is an instruction given to an exchange to buy or sell an asset at a specified price or range. It’s the fundamental mechanism through which traders interact with the market. 

Trade orders vary in complexity, from straightforward market orders to more intricate limit and stop-limit orders. Each type serves different trading strategies and risk tolerances, making it essential for traders to understand their nuances.

Market orders and limit orders are two fundamental types of trade orders used and offered within nftperp. As explained in more detail below, a market order is executed immediately at the current market price, offering speed and certainty of execution but with potential risks, especially in volatile markets. 

In contrast, a limit order allows traders to specify the exact price at which they wish to buy or sell an asset, providing control over the transaction price. However, this control comes with the trade-off of uncertainty in execution, as the order will only be filled if the market reaches the specified price, which may not happen if the market moves away from the target price.

What is a Market Order and How Does it Work?

A market order is the simplest and most immediate type of trade order. It’s an instruction to buy or sell an asset instantly at the best available current market price. Traders often use market orders when they prioritize speed and execution over the price. 

For instance, if Token A is rapidly rising, a trader might place a market order to buy immediately, capitalizing on the upward trend. However, market orders come with certain risks like price slippage, which is common in crypto markets, as the final execution price may differ from the price at the time of order placement.

What’s a Limit Order?

A limit order is an order request that allows you to set the price you’re willing to buy or sell an asset in the future. This order type tells the exchange the maximum and the minimum price you want to buy or sell your assets. 

Unlike another order type called a stop-loss order that would need the market price to reach the stop price before placing an order, the limit order is immediately registered in the order book and executed if the asset price reaches the predefined limit price.

For example, if you’re willing to buy token A currently with a market price of $200 for $180, you can place a limit order called a stop-loss order at $180. When the market price of the coin reaches your buy limit order, the exchange will automatically execute your trade. 

When to Use a Limit Order

A trader is more likely to use a limit order when they have a specific entry or exit price in mind for a particular asset. Instead of immediately jumping into the market, traders likely have done enough research to determine certain price points when they’d like to enter. For example, if you believe that Pudgy Penguin’s floor price is currently overvalued and anticipate a price drop, you can set a limit order on nftperp to buy the asset at a fairer price. 

How to Make a Market Order or Limit Order on nftperp

To create a market order, jump onto the nftperp exchange and select the NFT project you wish to trade on. Next, you want to select ‘Market’ and decide if you want to ‘Long’ or ‘Short’ the market value of Bored Ape Yacht Club.

As an example, if you believe the floor price of BAYC will fall due to recent news, then you might consider creating a short position like the one below.

Creating a limit order is also very easy to do on nftperp.  Jump onto the exchange, and instead of selecting ‘Market,’ you click on the ‘Limit’ option.  And let’s say that you believe that Pudgy Penguins is a great project but currently out of your price range.  Well, you can create a limit order for your desired price and when the market price drops to that price point, then your order will be executed!  Simple as that.

Conclusion

Understanding the difference between market and limit orders is fundamental to navigating any type of market effectively. Market orders offer immediacy, which is crucial in fast-moving market conditions, while limit orders provide price certainty, suitable for more calculated, strategic trading approaches. 

By mastering these trade order types, traders can enhance their ability to make strategic decisions, potentially leading to more successful trading outcomes in the ever-evolving crypto landscape.