Bitfinex Order Types and Options Explained

order types on Bitfinex

Investing in cryptocurrency is becoming more and more popular, as is the trading of coins for coins or coins for fiat currency. There are many platforms out there where individuals can log on to trade crypto coins with the hope of making a profit out of the market’s volatility.

But entering the world of trading can be a little daunting. If you are a beginner, it is not as simple as logging on and putting some money somewhere- you need to have a strategy and a good idea of what you are doing.

Bitfinex is one of the worlds leading exchanges for cryptocurrency trading and is operational in 52 countries whilst accounting for 10% of the exchange trading in the word.

But what about Bitfinex order types and options?

This guide will provide you with the basics on the different kinds of orders that you can place on Bitfinex- what they are, how to do them, and what you get in return. Hopefully, this will ease you into the world of crypto trading with a little bit of confidence!

Table of Contents:

  1. Limit Order
  2. Market Order
  3. Stop Order
  4. Trailing Stop Order
  5. Fill or Kill (FOK) Order
  6. Scaled Orders
  7. One Cancels Other (OCO) Order Option
  8. Post-Only Limit Order Option

Limit Order

A limit order is one of the most basic types of order and one of the easiest to understand. When a trader places a limit order it allows them to specify an exact price that they would like to either buy or sell.

It is a take-profit order where you can specify the amount of cryptocurrency at a specified price, or better. If however the order price cannot be met during the period of time that the order is left open, the order will not be executed. A limit order will also allow an investor to limit the amount of time that an order can be left open before it is cancelled.

The execution or fulfilment of a limit order is never guaranteed, but it does mean that the investor will not miss an opportunity to buy or sell at their chosen price point if it appears in the market. It can also be referred to as a buy limit order, or a sell limit order, depending on the direction that the position takes.

Market Order

An investor would usually make a market order through a broker or brokerage. The idea is to buy or sell the investment immediately and at the best available current price. A market order is the default option on all brokerage platforms and is the most likely to be executed as it does not contain any restrictions on things such as price, or the time period in which the order can be executed.

A market order can also sometimes be referred to as an unrestricted order due to its flexibility.

Out of all of the different order types, the market order is the one that is most likely to be executed and it is also the type that offers the lowest commissions. This is due to the fact that it requires very little work or input on behalf of the broker.

General advice when placing market orders is to avoid using them on stocks that have a low average daily value. This is because these stocks often have large spreads and generally result in a large amount of slippage when trades are executed at a market price.

Stop Order

When you place a stop order you are placing an order to buy or sell a security at a time when its price has increased to beyond a certain, specified point.

This means that there is a higher probability of achieving a predetermined entry or exit price and it also limits the investors’ loss and locks in their profit.

Once the price goes past the predetermined entry or exit point the stop order then becomes a market order.

Trailing Stop Order

A trailing stop order is an order that is designed to protect gains by allowing the trade to remain open and profiting as long as the price is continuing to move in the investors’ favour. The trade will close if the trade changes direction by a particular, specified percentage.

A trailing stop order can also be specified as an amount, rather than a percentage. An investor will place a trailing stop order for a long position that is below the particular cryptocurrencies market price. For a short position, they will set it above the current price.

Fill or Kill (FOK) Order

A fill or kill order is a type of order where the action of buying or selling a cryptocurrency is executed immediately, usually in a few seconds.

The order must also be fulfilled in its entirety as absolutely no partial fulfilments are allowed. A FOK is what is known as an extreme order and they are most often used when the order in question is for a very large quantity of cryptocurrency and there is usually a market or limit order that requires immediate execution.

They can also be used when more than one unlinked markets are available for the same asset. In this case, the trader will attempt to get the entire order filled in each of the markets at the same time, without having to manually cancel each order if it is left unfulfilled.

Scaled Orders

A scaled order is a particular type of order that consists of several different types of limit which are at incrementally decreasing or increasing prices. If a trader executes a buy scale order, the limit orders will decrease in price which will, in turn, trigger a buy at a lower price as the price starts to fall.

When a trader executes a sell order, the limit orders will increase in price, therefore allowing the trader to take advantage of increasing prices, therefore, locking in higher returns. If a trader comes to the conclusion that a cryptocurrency will fall in value over the course of a day, the scale order will allow them to take advantage of the lower price, if their prediction is correct.

Should the trader want to purchase 10 Bitcoin, they are able to scale the limit order so that 1 Bitcoin is purchased for every $100 decrease in price.

One Cancels Other (OCO) Order Option

An OCO option is a pair of orders that specify if one order executes, the other order will be automatically cancelled. An OCO order brings together a stop order and a limit order through the use of an automated platform.

When either the limit price or the stop price is reached and the order is carried out, the other order that has not been executed will be automatically cancelled.

This is a type of trade that is carried out by experienced traders who use it to mitigate risk and to enter the market.

Post-Only Limit Order Option

When a trader opts for this type of trade, a post-only limit order ensures that the limit order is only ever added to the order book and is not matched with a pre-existing order. If you make an order that matches a pre-existing order then your post only limit order would be automatically cancelled.

Placing this type of order means that you will only ever pay the maker fee and not the taker fee.

Remember that trading with cryptocurrency always carries a risk and there is no way of guaranteeing a return on your investment. Never invest more than you can afford to lose and remember that there will always be ups and downs when it comes to such a volatile market – no return is ever guaranteed.

Read more about Bitfinex order types and orders in our Bitfinex Review or Sign Up to Bitfinex.