A market order trades one token for another at the best available price. A limit order is an offer to trade at a set price and will not execute until that price is reached. Learn to trade with both!
Market orders and limit orders are best used together as part of an effective trading strategy. Each order type serves a different purposes, so it’s important to know which will best fit your trading strategy. This article breaks down the difference between a limit order and a market order, to help you understand the best times to use each of them.
The differences between a market order and a limit order
Market orders and limit orders are two of the most common order types in trading.
Set a limit order for free on Matcha!
A market order in crypto is also known as a swap. It’s a type of order that lets you exchange assets at the best price currently available on the market. When you place a market order to buy or sell crypto, the exchange will complete your trade using whatever offers are available. It will execute as soon as possible, but you may not get a fair price if liquidity is low.
Swaps are the most used trade type in DeFi and the easiest way to buy and sell crypto assets. Swaps are ideal when your main priority is completing your trade quickly.
A limit order, on the other hand, can take longer as it will wait around for a buyer to fill it. When you place a buy limit order or a sell limit order, you tell the exchange the specific price that you are willing to trade for. Your limit order will only go through when, and if, someone else is willing to trade your chosen asset at the price you set or better, so you will need to wait for the asset price to reach your limit.
Limit orders are ideal when your main priority is getting the best price for your trade.
Using market orders, an offer is created by a market maker, while the buyer is called the taker. When you set the price using a limit order, you are the maker, and whoever accepts your offer is the taker.
You can place market orders on most exchanges, but only a few decentralized exchanges (DEXs) offer limit orders. You can find out why in our recent deep dive into limit orders.
When to use market orders in crypto
When you need to act quickly, market orders will probably be your best bet for carrying out a trade. They won't give you as much control over the price you get, but will let you act quickly in any market with sufficient liquidity.
As a result, market orders are a great way to carry out near-instant swaps from your current assets to millions of new and established tokens.
Since the crypto space moves so fast, just a few minutes' delay can cost you opportunities. Swaps let you capitalize on any narrative in seconds without risking that the market will slip away from you by the time your trade executes.
You can swap even faster with Matcha Auto, to enter or exit a position with high priority, so you don't get left behind during big news events.
When to use limit orders in crypto
Limit orders are a great choice when you want to buy or sell at a certain price. They may take much longer to execute - or not fill at all - if you can set them far outside the current market price.
Several ways to use limit orders include:
- To automatically buy or sell tokens at a price based on your market analysis, without needing to manually execute the trade.
- To catch a flash peak or drop in the market.
- To average in or out of a position over a time period.
You can use limit orders to automatically buy coins whenever your favorite cryptocurrencies dip below a certain price, or sell when they peak. This lets you capitalize on opportunities without needing to constantly watch the market.
The closer you set your limit order to the recent price range of the market, the more likely it is to fill in a reasonable timeframe. Some limit orders may never execute if the price limit is not reached, or only fill partially, leaving you with only a few tokens exchanged.
This is especially common with limit orders set far outside the market price. But since nothing is paid unless your limit order actually triggers, you can set orders far below or above the price in case there's a sudden price movement.
Limit orders also let you cash out gradually to reduce your risk, or build a position as the market is dipping. This is done by splitting one trade into several limit orders, each at different prices, so you don't miss out on an opportunity completely if the market changes direction.
How to swap and set limit orders on Matcha
Matcha is a decentralized exchange aggregator that lets you place market orders and free limit orders without having to give up custody of your funds.
Using Matcha to swap tokens for free
Matcha lets you swap tokens with no added fees and the best prices in DeFi thanks to use of 0x Swap API. Using industry-leading infrastructure ensures swaps on Matcha have the lowest failure rates among any DEX or DEX aggregator, so your trade goes through first time.
To swap for free on Matcha:
- Go to matcha.xyz, connect your wallet and choose a token to trade.
- Set an amount to swap, choose Standard as your transaction mode, and click Review order.
- Once you're happy, select Place order and confirm using your wallet. Your tokens will arrive in a few seconds.
For an even smoother experience, use Matcha Auto to take advantage of gasless swaps and MEV protection. There is a 0.15% fee to use Matcha Auto, which delivers the same great price as standard but can save you money by avoiding sandwich attacks, and your trade is executed through private channels which can mean lower opportunity cost.
On Matcha, placing a market order is as user-friendly as a centralized exchange or traditional trading platform, and you never need to give up custody of your crypto!
Using Matcha to place limit orders
You can place limit orders for free using ERC-20 tokens (and wrapped tokens) on Ethereum, Polygon and BNB Smart Chain, and set a custom expiry time of up to 28 days in the future. Thanks to the 0x protocol's unique off-chain relay, your buy and sell limit orders are entirely free, unless you cancel the order before expiry.
If your limit order is filled successfully, onchain transaction fees are paid by the taker.
Like with swaps, this process is also designed to be intuitive and user friendly.
To set a limit order on Matcha:
- Choose a token.
- Open the Limit order tab in the trade module
- Say how much to Sell and set a price.
- Set an Expiry time.
- Review the order and confirm in your wallet.
We’ve provided more specific step-by-step instructions in our guide to limit orders.
Use order types together as part of a rounded trading strategy
People often think that different order types might be better than others. You shouldn't think of market orders vs. limit orders as if they are an exclusive choice. In reality, both should be used together to realize a more comprehensive and robust trading strategy.
You can use market orders whenever you need to quickly swap between two types of tokens. At the same time, you can have limit orders set in the background to buy assets or realize profits at your desired price points over a longer period of time.
By using a DEX aggregator like Matcha, which has both of these features in one place, you have more control over your crypto trades without having to use centralized platforms.
With the ability to also carry out fast cross-chain swaps to benefit from multiple chains, and recent limit order upgrades through the 0x API, there has never been a better time to use Matcha than right now!