Cryptocurrency market value witnessed a meteoric rise of 900% from March 2022 to Feb 2021! In February 2022, the total market capitalization of all cryptocurrencies stood at a whopping $1.7 Trillion. These two statistics are sufficient to demonstrate how popular cryptocurrency investment has become over the last 2-to 3 years.
Key factors contributing to the popularity of cryptocurrencies include worldwide legalization, high returns, little to zero transaction fees and other charges, secure transactions, and many others.
However, even though cryptocurrency is becoming a more mainstream financial system, most crypto investors have very little knowledge of cryptocurrency and how it works– which is worrisome.
Therefore, it is necessary that as an active crypto trader, you must have a basic understanding of digital assets and be familiar with cryptocurrency terminology and related concepts.
This post will discuss limit orders to broaden your crypto industry knowledge further. We will look at the definition of a limit order, how it works, an example of a limit order, the benefits of a limit order, the difference between a limit order and a market order, when to use a limit order, and more.
Let’s begin with a basic overview of limit orders in cryptocurrencies.
What Is a Limit Order In Cryptocurrency?
There are three common types of orders: Market orders, Limit orders and Stop orders. Let’s start with a basic understanding of how order works. When you place an order to buy or sell, your order is submitted to your broker or cryptocurrency exchange service provider, who will proceed to execute that order on the market.
Further, you should know that cryptocurrency prices can fluctuate daily. The system for routing orders has several moving components, all of which influence how quickly and at what price your order to buy or sell is processed. Using the correct order type can impact these elements and significantly affect whether your orders are executed as intended. It is necessary to understand the various order types for these reasons thoroughly.
A limit order is an order type that allows cryptocurrency traders to buy or sell a cryptocurrency at a specified price. You can use a limit order to define the exact price you want to buy or sell cryptocurrency. The order will not be processed until that specific cryptocurrency can be purchased or sold at the given price or lower.
However, due to the price constraint, there is no guarantee that the order will be filled quickly or at all. Limit orders are typically used by cryptocurrency investors or traders who have a target entry or exit price and are ready to wait for the market to move in their favor.
Read about crypto liquidity here.
Example of Limit Order
Let’s look at an example to understand limit orders in cryptocurrencies better.
Assume a cryptocurrency A is currently trading at 40 AED. However, an investor believes it would be an ideal buy at AED 35 or less. In other words, they want to buy the crypto coin A for AED 35 or less.
This investor could place a buy limit order for that cryptocurrency at AED 35. The order will never be processed or filled if the crypto coin never reaches your limit price. However, if the cryptocurrency A falls to AED 35 or less, the order will be honoured, and the investor will purchase the cryptocurrency A at AED 35 or less.
Nevertheless, it would be best if you kept in mind that, in addition to costs, volume is also an essential factor. If the investor wishes to buy 1000 coins at that price –AED 35 – 1000 or more crypto coins must be available to be sold at that price for the order to be executed successfully.
How Limit Order Works?
As previously stated, a limit order is simply a set of pre-specified prices for purchasing or selling cryptocurrencies or any security. For example, if the trader wants to buy crypto coin A for AED 50, they will only do so if the price is AED 50 or below. Similarly, if the trader wishes to sell crypto coin A at a price limit of AED 70, the order will not be fulfilled or executed until the price reaches AED 70 or above.
Also, keep in mind that if other sell orders for crypto A are placed before yours, the system will execute those orders first. Following that, your limit order will be executed with the remaining liquidity.
The expiry period is another thing to keep in mind while placing a limit order. Limit orders on most cryptocurrency exchanges have a 90-day expiry period. Meaning if the price of coin A does not reach the price you set in 90 days, the order will be canceled. However, you can reset the limit order at the same or a different price.
Limit orders are ideal for traders who do not trade daily or who are not regular traders. Limit orders give such unreliable traders more control over the execution price of cryptocurrencies, especially if they are hesitant to use a market order during moments of high volatility.
However, there is a downside to using a limit order too. For example, the current market price of crypto A is AED 40. You placed a limit order to sell 10 crypto A at AED 48. After one week, the price of A rose to $58. Since the market price has surpassed the limit price you specified, your order was filled at $48.
In this scenario, you will make less profit because your order was executed at the limit price of AED 48. However, if you haven’t placed a limit order, you may be able to sell those crypto A for $58 or more. To avoid such a situation and sell crypto at the best possible prices, it is recommended that you evaluate your open limit orders regularly to stay up with the ever-changing market conditions.
Let’s have a look at the advantages of limit orders now.
Benefits of Limit Orders
There is no doubt that limit orders offer multiple benefits to both novices and experienced crypto traders. The following are some of the primary benefits of limit orders:
The primary benefit of limit orders is that they allow traders to sell or buy cryptocurrencies at the prices they wish.
Limit orders allow traders to make trials and errors to understand the required trade level since it is highly unlikely that the market level will reach the required level quickly.
Limit orders give traders more control over the order execution.
Limit orders are especially useful when trading in large volumes or with multiple cryptocurrencies simultaneously since tracking each cryptocurrency would be challenging.
Limit orders also relieve traders of the need to monitor the market constantly. Instead, they can place the buy and sell limit orders and forget about the rest.
These are some of the primary advantages of limit orders. In general, limit orders give traders more control, save time, and help keep their investments secure.
Let’s move on to the next section to learn about the differences between limit and market orders.
find top cryptocurrencies to look out for in 2022 here.
A Limit Order Vs. A Market Order
Many crypto traders, especially beginners, fail to distinguish between limit and market orders. However, as both of these order types are essential and serve different purposes, it is critical to understand them thoroughly to avoid costly mistakes.
Although both market orders and limit orders provide traders with additional flexibility in making informed decisions, their purposes are unique. A market order is intended to execute as soon as possible and at the current market price. On the other hand, limit orders are an order type in which traders set the buy or sell price, and the order is executed only if the price hits that level.
Another significant distinction between a limit order and a market order is that you do not need to specify the prices in the case of a market order. However, in the case of a limit order, you must define the prices at which you wish to buy or sell cryptocurrencies. Limit orders can also be used to set a stop loss, and however, you cannot use a market order to set a stop loss.
Moreover, executing market orders necessitates the trader’s analytical ability in order to determine the best time to execute the trade. On the other hand, a limit order does not necessitate such expertise. Instead, it allows traders, particularly beginners, to conduct trials and errors to understand the necessary trade level.
These are the primary differences between market orders and limit orders. Let us proceed to the next section to learn how to place limit orders on the Fasset cryptocurrency exchange.
How to Place Limit Orders On Fasset?
Placing limit orders on Fasset is a simple process. However, to trade cryptocurrencies on Fasset, you must first register with the platform. The registration process is pretty simple and consists of only two steps outlined below:
Step 1: Sign up for the Fasset cryptocurrency exchange.
Step 2: Select a payment method.
After completing these two stages, you will be able to trade all types of cryptocurrencies, including Metaverse coins, Altcoins, and stable coins.
Now comes the limit order.
To place a limit order on Fasset, follow the steps listed below:
Step 1: Navigate to the Market tab and select the cryptocurrency you want to buy or sell.
Step 2: Click on the Buy/Sell tab and select the Limit option from the drop-down menu.
Step 3: Enter your preferred price for selling or buying the coin.
Step 4: Enter the number of crypto coins you want to buy or sell at that particular price limit.
Step 5: Once done, click buy/sell and confirm the order.
After completing these five steps, the limit order will be successfully placed on the Fasset. You can verify, update, edit, or delete open limit orders from the Portfolio section.
These orders are only executed when the set price and the market price coincide. Also, if the market price does not reach your limit order price and orders are not executed within 90 days, the open limit orders will expire, and you will have to renew the limit order.
That’s everything about the limit order. If we’re not mistaken, we’ve covered everything about limit orders in cryptocurrencies, including the fundamentals of limit orders, how they work, the benefits of limit orders, the differences between limit orders and market orders, and how to place limit orders on Fasset.
We are confident that this information will help you improve your trading practices and minimize risk.
However, just as it is crucial to understand the various cryptocurrency fundamentals, knowing the best cryptocurrenciesa to invest in is also necessary.
To help you out, our expert team has studied hundreds of cryptocurrencies and compiled a list of the top 10 cryptocurrencies that you should consider adding to your portfolio.a
Let’s take a quick look at each of these 10 crypto coins, their circulation, market capitalization, and more.
Top 10 Cryptocurrencies To Invest In 2022
Bitcoin (BTC): BTC is the first cryptocurrency and has the largest market capitalization. BTC, like the majority of cryptocurrencies, is based on blockchain technology.
Price: $38, 543
Market Cap: $729,295,650,521
Circulating Supply: 18,946,468 BTC
Ethereum (ETH): Ethereum, also known as Ether, is the cryptocurrency of the Ethereum network. It is the second most popular digital currency, following Bitcoin.
Price: $2,763
Market Cap: $329,921,852,873
Circulating Supply: 119,409,317 ETH
Cardano (ADA): Cardano is a public blockchain platform that aims to create a more balanced and sustainable cryptocurrency ecosystem.
Price: $1.09
Market Cap: $36,492,873,498
Circulating Supply: 33,566,200,057 ADA
Solana (SOL): Solana is a decentralized blockchain created in 2020 to enable scalable, user-friendly applications. Its native currency is the SOL.
Price: $109.48
Market Cap: $34,553,504,784
Circulating Supply: 314,885,017 SOL
Decentraland (MANA): Decentraland is a virtual reality platform based on the Ethereum blockchain that enables users to create and monetize content. MANA is its native currency.
Price: $2.67
Market Cap: $4,873,677,605
Circulating Supply: 1,824,497,035 MANA
Binance Coin (BNB): Binance is a top cryptocurrency exchange platform in terms of volume, and it supports crypto-to-crypto trading in over 500 crypto coins. Its native currency is the BNB.
Price: $382.87
Market Cap: $63,224,222,431
Circulating Supply: 165,116,761 BNB
XRP (XRP): XRP is the native cryptocurrency of RippleNet– a blockchain-based payments network aiming to make cross-border transfers faster and cheaper.
Price: $0.6265
Market Cap: $29,888,047,398
Circulating Supply: 47,736,918,345 XRP
Polkadot (DOT): Polkadot is a blockchain interoperability protocol developed in 2016. Its goal is to make information exchange between independent blockchains easier. Its native currency is the DOT.
Price: $20.19
Market Cap: $19,958,960,246
Circulating Supply: 987,579,315 DOT
Avalanche (AVAX): Avalanche is a smart contract platform that uses a proof of stake protocol and is one of the fastest in the blockchain industry. Its native currency is AVAX.
Price: $73.05
Market Cap: $17,896,469,124
Circulating Supply: 245,012,143 AVAX
Polygon (MATIC): Polygon is a protocol and framework for building and connecting Ethereum-compatible blockchain networks. MATIC is its native currency.
Price: $1.64
Market Cap: $12,217,996,032
Circulating Supply: 7,461,070,291 MATIC
(Figures are as on February 2nd, 2022.)
These are the top 10 cryptocurrencies to buy in 2022. However, as with any investment, we recommend that you conduct your research and consult with a financial expert before investing your life savings. Also, get acquainted with the cryptocurrency market and follow tips and tactics to improve cryptocurrency returns.
Read our previous blogs to learn more about cryptocurrencies, virtual worlds, NFTs, digital assets, blockchain technology, and other topics. To begin your cryptocurrency investment journey, simply register with Fasset, select a payment method, and begin trading.