Market order vs. limit order in crypto: the difference explained

When you place your first trade, you usually have to choose straight away: market or limit? Many beginners just pick whatever is selected by default. That works, but it helps to know what you are choosing. The difference comes down to one question: do you want certainty that your order is filled, or certainty about the price?

In this article you will learn how an order book works, what market and limit orders do, what slippage and fees have to do with it, and when each type makes sense.

First: what is an order book?

Every trading pair, such as BTC/USD, has an order book: a list of everyone who wants to buy or sell at a certain price.

• The asks are the sell orders: "I'll sell 0.3 BTC at $60,020."
• The bids are the buy orders: "I'll buy 0.4 BTC at $59,980."

The lowest ask and the highest bid sit closest together. The gap between them is the spread. In the example above, the spread is $40. In busy markets the spread is usually small. In quiet markets or with small coins, it can be much bigger.

A simplified example:

• Sell: 1.2 BTC at $60,100
• Sell: 0.5 BTC at $60,050
• Sell: 0.3 BTC at $60,020
• spread: $40
• Buy: 0.4 BTC at $59,980
• Buy: 0.8 BTC at $59,950
• Buy: 1.0 BTC at $59,900

What is a market order?

A market order says: "Buy (or sell) right now, at the best price available." Your order is matched immediately with the orders already in the book.

Say you place a market order to buy 0.5 BTC in the book above. You first get the 0.3 BTC at $60,020, and then 0.2 BTC at $60,050. Your average price ends up slightly higher than the best price you saw. That difference is called slippage.

Pros: fast, and almost always filled. Cons: you don't know the exact price in advance. With large orders, quiet markets or sudden moves, slippage can be noticeable.

What is a limit order?

A limit order says: "Buy (or sell) only at this price or better." If you place a limit buy at $59,950, your order is only filled at $59,950 or lower. Until then, it waits in the order book.

Pros: you decide the price. No surprises from slippage. Cons: your order may never be filled. If the price moves away from your limit, you miss the trade. Your order can also be filled only partly.

Maker and taker fees

Many platforms use two kinds of fees:

• A taker removes liquidity from the order book. A market order is almost always a taker order.
• A maker adds liquidity by placing an order that waits in the book. A limit order that does not fill right away is usually a maker order.

On many platforms maker fees are lower than taker fees, but this differs per platform. Always check the fee page before you trade, and include fees in your calculations. With frequent, small trades, fees add up quickly.

When does which order make sense?

There is no type that is always better. It depends on the situation.

• You want to get in or out quickly, and the market is busy: a market order is simple, and in a busy market slippage is usually small.
• You have a specific price in mind and you are not in a hurry: a limit order gives you control over the price.
• The market is quiet or the coin is small: be careful with market orders. A wide spread and few orders in the book can make your average price noticeably worse.
• You want to limit a loss: a stop-loss is a special order that turns into a market or a limit order when a certain price is hit. Read more in what a stop-loss is.

Common mistakes

• Using market orders in thin markets. You see one price, but you pay a worse one.
• Setting a limit far away and forgetting it. Weeks later it gets filled at a moment when you no longer wanted to trade.
• Ignoring fees. A trade that looks fine on the chart can look different after fees.
• Chasing the price with limit orders. You keep moving your limit up "just a bit", and end up paying more than you planned. Decide your price before you start.

Practise both order types in Nova

In Nova every account starts in paper mode: you practise with virtual money on live prices. That makes it a good place to try both order types and see how fills, spreads and fees work, without a mistake costing you real money.

In Nova a stop-loss is mandatory on every order, risk limits can only be made stricter, and the kill switch stops all new orders with one button (plus a confirmation). Keep in mind that results in paper mode are simulated: in real markets, fills and slippage can be different. Read also what paper trading is and where its limits are and how to calculate your position size.

Curious how both orders behave? Create a free account and try them with virtual money.

Frequently asked questions

Is a limit order always cheaper?

Not necessarily. You control the price, and maker fees are often lower, but your order may not be filled. Whether that matters depends on your situation.

Why did I pay more than the price I saw?

With a market order you take the orders available in the book. If the best price only has a small amount, the rest of your order is filled at the next prices. That is slippage.

Can a limit order be filled partly?

Yes. If only part of the amount is available at your price, only that part is filled. The rest keeps waiting in the book until it is filled or you cancel it.

Which order should a beginner use?

Both are worth knowing. Practise each one with virtual money first, so you understand what happens before you decide anything yourself.