stop-limit order vs . limit order
A limit order is an order to buy or sell a specific amount of cryptocurrency at a specified price. when you place a limit order , you are essentially specifying the maximum price you are willing to pay to buy a cryptoccurency or the minimum price at which you are willing to sell it .
Typically , traders place limit sell orders above the current market price and buy limit orders below the current market price . If you place a limit order at the current market price, it will likely be filled withing seconds ( unless it is an illiquid market ) .
On the other hand , a stop-limit is an order to buy or sell a cryptoccurency when it reaches a specific price know as the stop price , and then execute the trade at a limit price you have set. The limit price is the minimum amount you are willing to accept when selling or the maximum amount you are willing to pay when buying .
The main difference between the two is that a limit order is used to specify the price at which you want to buy or sell , while a stop-limit order is used to specify the price at which you want to trigger a trade and the price at which you want to execute it.
how does a stop-limit order work ?
A stop-limit order is an advanced trading order that combines elements of a stop order and a limit order. It is commonly used in cryptocurrency trading to automatically buy or sell a cryptoccurency once it reaches a certain price level.
The Best way to understand a stop order is to break it down into parts .The stop price acts as the trigger for placing a limit order . when the market reaches the stop price , it automatically creates a limit order with a custom price (limit price)
therefore , to create a stop-limit order, you must define two different price points : a stop price and a limit price . The order becomes active and triggers the limit order when the stop price is reached .
The limit price is the price at which the order will be executed once the stop price is reached