Trading basics
A button can place an order. It cannot remove uncertainty. Learn the mechanics and see how a change in price affects a position.
Educational content only. Not financial advice.
By Bitcoin Field Guide. Published and updated .
The instruction
Market orders use available prices, limit orders set price conditions, and stop orders use triggers. Platform definitions vary; these examples explain the mechanics without recommending an order.
Requests execution at the prices currently available. Larger orders can consume several price levels. The final price can differ from the last trade shown.
The trade-off: price uncertainty. Availability and platform rules still affect execution.
Sets a maximum buying price or minimum selling price. It may fill at that price or better, in parts or not at all. Reaching the price does not guarantee a fill.
The trade-off: execution uncertainty. Other orders may be ahead of yours.
Activates when a specified trigger is reached. A stop-market becomes a market order. A stop-limit becomes a limit order. Trigger definitions vary by platform.
The trade-off: a stop-market can slip in price; a stop-limit can remain unfilled.
The market around the order
The last traded price is history. The best bid and ask show the current prices offered by buyers and sellers.
A smooth chart can hide a difficult experience. Real execution happens at available prices.
The gap between the highest bid and the lowest ask. In a hypothetical quote with a bid of 99 and an ask of 101, the spread is 2 price units. It is distinct from an explicit trading fee.
The difference between an expected price and the actual execution price. Thin liquidity, a large order or a fast market can make that difference larger.
The extent of price variation over time. Sharp moves can change the value of a position quickly. A recent pattern does not tell you the next move.
A hypothetical exercise
For an unleveraged holding, a simple price-loss estimate is position value multiplied by the percentage fall. This example uses fictional currency units.
1,000 units × 20% = 200 units.
Excludes fees, spreads, taxes, leverage and execution effects. A planned exit or stop does not guarantee this loss limit. An asset's value can fall to zero.
Common beginner mistakes
Common trading mistakes involve assuming certainty about prices, execution, losses or custody.
The last trade is not a promise of the price available for your order. Check spreads, fees, liquidity and the final order details.
Gaps, fast moves, outages and thin liquidity can affect triggers and fills. A stop-limit may never execute.
A rising chart, a social-media tip or a fear of missing out does not establish what happens next. Guaranteed-return claims are a reason to pause.
Adding size or borrowing changes the amount at risk. It does not make a past loss more likely to be recovered.
Trading risk also includes the service holding funds. Understand withdrawal rules and keep records of orders, fills and charges.
Investor.gov explains order mechanics in a securities context. Crypto-platform names, triggers and execution policies can differ.
Answers for the field
Order instructions affect execution, while position size affects the amount exposed.
A market order requests execution at available prices, so its final price can differ from the last trade shown. A limit order sets a maximum buying price or minimum selling price. It may fill at that price or better, partly or not at all. Availability and platform rules affect execution.
No. A stop-market becomes a market order after its trigger and can execute at an unexpected price. A stop-limit becomes a limit order and can remain unfilled. Gaps, fast moves, thin liquidity and outages can affect execution. Trigger definitions also vary by platform, so a planned exit is not a guaranteed loss cap.
The spread is the gap between the highest bid and lowest ask at a given moment. Slippage is the difference between an expected price and the price actually obtained. Both can affect the cost of execution, and neither is the same as an explicit trading fee charged by a service.
For an unleveraged holding, multiply the position value by the percentage price fall. A 20% fall on 1,000 fictional units gives a 200-unit price loss; the same fall on 100 units gives 20. This illustration excludes fees, spreads, taxes and execution effects. Leverage introduces further risks, and value can fall to zero.
Educational content only. Not financial advice.