Understanding Trailing limit sell, stop sell, and buy/sell limit order

Advanced traders always use different trading order types rather than just a basic buy and sell market order. Buy and sell orders at market price will usually ensure that your trade is occurring, but it may also include slippage.

Slippage refers to the difference between the expected price of a trade and a price at which trade is executed. It may occur anytime but is most prevalent at the time of higher volatility when market orders are used. Market prices change quickly, allowing slippage to occur during a trade being occurred and when it’s completed.

To avoid such conditions, the best crypto trading terminal like TrailingCrypto provide advanced order types to the traders which allow them to specify buying and selling price in crypto trading. These order types eliminate slippage and ensure that the trade is executed at an exact price if and when the market reaches that price during the specified time.

A variety of advanced orders are available to traders to set trades with specific parameters. Each trading platform will have its own set of offering of the trade order options. The most common order types used in cryptocurrency market are market, limit, stop, stop limit, and the trailing stop orders. Here we will discuss limit order to buy and a stop order to sell along with its advanced order types.

Limit orders are the conditional orders which mean that order will only be placed if the price of an asset reaches to a certain level.

Buy/sell limit order

Both buy and sell limit orders allow traders to specify their own price rather than taking the market price at the time order is executed. Using a limit order for buy allows a crypto trader to specify the exact price they want to buy the crypto coins at. Usually, it is a calculated entry point.

A limit order allows you to specify the maximum or desired price at which you want to buy an asset and the minimum price at which you want to sell. Sell limit order help traders to limit their downside risks while buying or selling their stocks.

Stop sell order

A stop sell order is used while selling a crypto asset. This order type is much different than placing a limit order as it includes a stop price that triggers the allowance of market order. These orders have a specified stop price.

In this order type, a trader has to specify a stop price to sell their order. If the crypto asset price moves to the stop price, then a market order is triggered to sell an asset. Different than limit orders, this order type involves some slippage since there will be a marginal discrepancy between stop price and the following market price execution.

A stop sell order is usually used to limit losses and managing already accumulated profits.

Let’s understand it with an example:

Say, a trader has bought XYZ at $35 per coin but wishes to risk no more than $5 per share loss on this trade. He places a stop sell order just below $30, say at $29.50. If the market price falls to $29.50, then a sell stop order will be triggered, and XYZ stock is sold at the next available price.

Stop limit order

Stop limit order is a type of conditional order which is executed if a certain condition is met. This condition is that the order is executed only when the market reaches a certain price limit. This certain price point is called the Trigger Price. Your order will be executed between target price and the trigger price.

Target Price is the maximum price that you are willing to pay/receive while buying/selling cryptocurrency.

Trigger price is the price point which when meet releases your order in the open order book.

Traders use stop limit orders when they are not actively monitoring the market, and the order helps trigger a buy or sell order if the security reaches a specified point. Once the price is attained, the order is triggered automatically.

Stop buy limit is used to buy a crypto asset if the price hits to a specific point. It helps traders to control the buying price of the crypto asset once they have determined an acceptable maximum price. A stop price and limit price are set here. On the other side, stop sell limit order is a conditional order where the trader sells an asset when its price falls to a specific price, i.e. the stop price. A stop sell order allows traders to sell the asset if the price decreases to the stop point or below.

Since there are some risks with these order types, the experienced traders use trailing orders to protect their gains and cut the losses.

Trailing stop limit order

A trailing stop limit order allows a trader to specify a limit on the maximum possible loss, with setting a limit on the maximum possible gain. A trailing limit sell order moves with the market price and recalculates the stop trigger price at a fixed point below the market price based on the user-defined trailing amount.

As the market rises, both the stop price and limit price rises by the trail amount and limit offset, but if the market falls, the stop price remains unchanged. And, when the stop price is hit, the limit order is submitted at the last calculated price.

Similarly, a buy trailing stop limit order is the mirror image of Trailing limit sell order.

Let’s understand Trailing limit sell order in depth:

Enter a trailing limit sell order

Say you buy 100 coins of XYZ for $66.34 and want to limit your loss. You set a trailing stop limit order with amount 20 cents below the current market price of $61.90. Trailing amount is the amount used to calculate the initial stop price, by which you want the limit price to trail the stop price.

To do this, you have to create a sell order, click Trail limit and enter 0.20 in the trailing amount field. In this order type, you specify a stop price and either a limit price or a limit offset. Here we will set limit offset. You enter a stop price of $61.70 and a limit offset of $0.10.

Market rises

As soon as you submit your order, the price of the market starts to rise and hits $62. The stop price has adjusted accordingly and is at $61.80 and your limit price will also be adjusted automatically and is calculated as$61.70.

Market falls

Suddenly the market falls and XYZ drops to $61.90. Here your stop price and limit price will remain unchanged.

Market price touches the stop point, order is triggered

If the price of XYZ continues to drop and touches your stop price i.e. $61.80. A limit order to sell the XYZ for 100 coins at $61.70 is submitted to fill the calculated limit price better.

Conclusion

Ordinary stop limit orders only specify the amount of loss you define while placing the order. But on the other side, trailing limit orders automatically update your order to limit the maximum loss possible and turn the whole trade profitable.

TrailingCrypto is one of the best crypto trading terminal that allows traders to use all the above order types and other advanced orders to mitigate their risks and maximizing the profits.