A limit order is an order to buy a security at no more than a specific price, or to sell a security at no less than a specific price (called "or better" for either direction). This gives the trader (customer) control over the price at which the trade is executed; however, the order may never be executed ("filled"). Limit orders are used when the trader wishes to control price rather than certainty of execution. A buy limit order can only be executed at the limit price or lower. For example, if an investor wants to buy a stock, but doesn't want to pay more than $20 for it, the investor can place a limit order to buy the stock at $20. By entering a limit order rather than a market order, the investor will not buy the stock at a higher price, but, may get fewer shares than he wants or not get the stock at all. A sell limit order is analogous; it can only be executed at the limit price or higher. A limit order that can be satisfied by orders in the limit book when it is received is marketable. For example, if a stock is asked $86.41 (large size), a buy order with a limit of $90 can be filled right away. Similarly, if a stock is bid $86.40, a sell order with a limit of $80 will be filled right away. A limit order may be partially filled from the book and the rest added to the book. Both buy and sell orders can be additionally constrained. Two of the most common additional constraints are fill or kill (FOK) and all or none (AON). FOK orders are either filled completely on the first attempt or canceled outright, while AON orders stipulate that the order must be filled with the entire number of shares specified, or not filled at all. If it is not filled, it is still held on the order book for later execution.
A market order is a buy or sell order to be executed immediately at current market prices. As long as there are willing sellers and buyers, market orders are filled. Market orders are therefore used when certainty of execution is a priority over price of execution. A market order is the simplest of the order types. This order type does not allow any control over the price received. The order is filled at the best price available at the relevant time. In fast-moving markets, the price paid or received may be quite different from the last price quoted before the order was entered. A market order may be split across multiple participants on the other side of the transaction, resulting in different prices for some of the shares.
A stop-limit order is an order to place a regular buy or sell order (also known as a "limit order") when the highest bid or lowest ask reaches a specified price, known as the "stop." This can be helpful for protecting profits or minimizing losses.
The stop-limit box has three inputs:
Let's go over some examples.
Suppose you bought 100 LTC at a price of 0.023 BTC. It's now at 0.026 BTC. You've made some profit, but you're feeling good about LTC and think it has nowhere to go but up. At the same time, you're aware that crypto is volatile, and that tomorrow's headline ("Mt. Gox Loses 750 Million LTC") could cause the price to crash. How can you hold your LTC, but make sure you get out if a crash comes? Place a stop-limit order with these parameters:
Stop: 0.024 BTC
Price: 0.023 BTC
Amount: 100 LTC
Then click "Sell" in the stop-limit box. A confirmation box will come up telling you what will happen: "If the highest buy order price drops to or below 0.024 BTC, an order to sell 100 LTC at a price of 0.023 BTC will be placed."
You now have some protection. You're holding your LTC, but if the price crashes to 0.024BTC, your LTC will automatically be sold (as long as there are enough buy orders at or above 0.023 BTC). As with a regular sell order, your coins will be sold at the best possible price; so, if you want to be sure your coins get sold, set the price even lower.
Your price does not have to be lower than your stop. If you anticipate a dead cat bounce to 0.025 BTC after the crash to 0.024 BTC, you can set your stop at 0.024 BTC and your price at 0.025 BTC. This will cause a sell order at 0.025 BTC to be placed should the highest buy order price drop to 0.024 BTC.
Suppose XMR has crashed to 0.002 BTC. It's low, and it's a good time to buy those 300 XMR you've been wanting. But you think it isn't done crashing, and would like to wait for it to go even lower before buying. Still, you could be wrong, and want to be sure you don't miss out on buying if a whale comes along and pumps the price to the moons of Neptune. Place a stop-limit order with these parameters:
Stop: 0.0022 BTC
Price: 0.0025 BTC
Amount: 300 XMR
Then click "Buy" in the stop-limit box. A confirmation box will come up telling you what will happen: "If the lowest sell order price rises to or above 0.0022 BTC, an order to buy 300 XMR at a price of 0.0025 BTC will be placed."
Now, you can watch the price plummet as bagholders wail in despair. But if you're wrong and the price skyrockets, you'll automatically buy in when the lowest ask reaches 0.0022 BTC (as long as there are enough sell orders at or below 0.0025 BTC to cover your purchase).
As with the sell-type stop-limit order, you can place your price anywhere you want. If you want to bet on a downtick after the price hits 0.0022 BTC, you can set your stop at 0.0022 BTC and your price at 0.0021 BTC. This will cause a buy order at 0.0021 BTC to be placed when the lowest ask reaches 0.0022 BTC.
If this is all too much to remember, just try entering some numbers in the stop-limit box and clicking "Buy" or "Sell." The confirmation box will come up and tell you exactly what will happen, and the order won't actually be placed unless you approve it.
A Reaction is awesome. and should probably be explained in much better detail than this