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Learn Advanced Trading

How to trade with limit,

market, stop-limit, and
bracket orders
Learn about order types in part two of our guide to

advanced trading tools that let you take greater

control of your portfolio.

Coinbase, other crypto exchanges, and

stock markets like Nasdaq o"er multiple
di"erent ways to buy or sell assets —
some are simpler and more automated,
while others require more knowledge but
also o"er more control. On Coinbase, for
instance, when you navigate to an asset’s
page you’ll first see the basic trading
interface. This allows you to simply enter
an amount and click Buy — your purchase
will happen automatically. You can sell
crypto from your portfolio in much the
same way.

But if you want to take more control over

a trade because, for instance, you think
prices are going to move up or down in
the future — you can toggle to Advanced
Trading and manually set your preferred
price. To do that, you’ll need to know
about a few di"erent types of orders.
Let’s dig in.

Coinbase is currently rolling out a suite of

Advanced Trading tools, so in this series

we’re breaking down some of the functions

and terminology you’ll encounter. Much of

this information isn’t specific to Coinbase

or even crypto, making it useful to learn if

you have any interest in markets and

trading. We also have a new video series

that covers this material in more detail and

illustrates exactly how these new tools,

charts, and features work if you’re using the

Coinbase app or Coinbase.com.

What is an order book?

Coinbase Advanced Trading: Wh…

Definition

An order book, essentially, is a list of

current buy orders (also known as “bids”)

and sell orders (also known as “asks”) for a

specific asset. Order books show not only

the price buyers and sellers are willing to

pay, but also how many discrete units (as in

tokens) they seek to buy or sell at each

price.

On Coinbase, billions of dollars worth of

buy and sell orders of di"erent types are
regularly matched between millions of
customers. For each cryptocurrency
that’s available via the Coinbase app and
on Coinbase.com, you’ll find an order
book — which gives you a sense of where
the market is moving by showing buy
orders (or “bids,” in green) and sell orders
(also known as “o"ers” or “asks,” in red).

Read more about order books in part one

of this series

Let’s say BTC is currently trading near

$62,000 per coin. You’ll see asks scrolling
down from the top in descending order of
value. And you’ll see bids scrolling up
from the bottom in ascending order of
value. The number in the middle is the
spread, or the di"erence between the
two.

But because Bitcoin prices can be

volatile, you may have a more specific
strategy than just buying at the current
price. If you believe that BTC is currently
too high at $62,000, you can use the
Advanced Trading view to set up a limit
order to buy 10 BTC at, say, $59,000 each.

Other traders might believe prices are

going up. In that case, they might set up a
limit order to sell 10 BTC when the price
hits $65,000.

Of course, the market may never reach

either of those price levels again, so
these orders may never be filled. (You can
also set a time frame for your order,
which is called “Time in Force”
— allowing you to specify, for example,
how long an order will remain active.)

Let’s take a closer look at the three main

order types: market orders, limit orders,
and stop orders.

What is a market order?

Definition

A market order is a buy or sell order that

executes immediately at the best available

market prices.

If you care less about the exact price and

more about having your trade executed
as quickly as possible, you can use a
market order. Market orders typically
allow you to buy or sell at the best
available market price. For buyers, this
will generally be the lowest current ask.
For sellers, it will generally be the
highest current bid. Market orders are
useful if prices are changing fast and you
want to enter or exit your position as
soon as possible.

That said, market orders may not get you

the best price possible, especially if
you’re trading large volumes. Slippage
happens when there isn’t enough of an
asset available at the current market
price to completely fill a market order. As
a buyer, this can result in part of your
order being filled at a higher price.

The act of placing a large order — to buy

or sell 1,000 BTC, for instance — could
also influence the market significantly,
meaning that some of your order could
cost much more than the original o"er. If
you believe the market is moving in a
specific direction and you want to buy or
sell at a specific price without staring at
your screen 24/7, a limit order may be a
better option.

What is a limit order?

Definition

A limit order lets you set a maximum price

for the order — it will only execute at this

price or better.

Let’s say Bitcoin is currently trading near

$62,000, but you think it might go lower.
If you’d like to wait and buy at a lower
price you can set a limit order to buy, say,
0.1 BTC at $60,000 — which would mean
you’d pay $6,000 (plus fees) instead of the
$6,200 you’d pay via market order.

Limit orders are executed in the order

they appear on the order book. Your limit
order would only be filled if the exchange
can match a seller for $60,000 or below.
Of course, there’s no guarantee that the
market price will reach $60,000 again, so
your limit order may never be filled.

Limit orders are also a good way to trade

large amounts because they ensure
you’re only paying your preferred price as
it becomes available. The downside is
that there’s no guarantee your order will
be filled, since the market price may
never reach the price level you specified.

What is a stop limit

order?

Definition

Stop-limit orders allow you to

automatically place a limit order to buy or

sell when an asset’s price reaches a

specified value, known as the stop price.

This type of order can help traders protect

profits and limit losses.

You can set two di"erent parts of a stop-

limit order: the stop price and the limit
price. These don’t have to be the same
amount, and traders use them together
to help manage risk.

The stop price is based on the best

available price — not necessarily the
price you set. The limit price adds an
extra control by setting a more precise
price constraint on your trade. With a
stop-limit order, your trade will only go
through at your desired price or better.
There’s no guarantee it will execute.

Let’s say you’ve successfully bought your

0.1 BTC at the $62,000 price. After doing
some more research you now believe that
BTC could fall below $55,000 — in this
scenario, you’d prefer to cash out of your
position rather than wait for prices to
rebound. You can set a stop price to sell if
it reaches $55,000 or below.

Adding a limit price of $54,950 ensures

that once the stop price is reached, the
limit order, if triggered, will execute at
that price or higher. In a fast moving and
or low liquidity market, this can protect
you from trading at an undesired price.
While your portfolio value would drop,
selling your BTC via stop-limit order may
reduce further losses if prices were to
drop even lower.

Or imagine a scenario where, just after

you buy, BTC’s price suddenly rises to
$69,000 (congrats!). If you think prices
could sink again, you can protect some of
your gains by setting up a stop-limit
order to sell only if the price reaches, say,
$65,000. Setting a limit price at the same
amount will ensure you’re only selling for
$65,000 or better. If the best available
price drops below $65,000, your order
may not execute completely — or at all.

There’s no one-size-fits-all solution for

di"erent order types, especially as crypto
prices can be volatile. Each order type
has its advantages and disadvantages,
and traders should carefully consider
which might be right for them.

What is a bracket order?

Definition

A bracket order is an advanced order that

allows you to simultaneously set a

predefined “limit price” and “stop price”

for an asset you already hold. This allows

for two opposite limit orders to be set in

either direction of price.

A bracket order allows you to let a

favorable position continue to run or to
get out as soon as possible, mitigating
further potential losses in volatile
markets. Let’s say you currently hold 1
BTC and the current market price is
$62,000. To mitigate risk, you decide to
place a bracket order for 1 BTC. You first
set a limit price of $65,000. This means
that if the market price of Bitcoin reaches
$65,000, a limit order to sell 1 BTC will be
placed at that price or better. You then
also set a stop price at $59,000. This
means that if the market price of Bitcoin
drops to $59,000, a market sell order for 1
BTC will be triggered to help limit
potential losses. Depending on which
order is triggered first, the other order
will be canceled automatically to help
you manage risk e"ectively.

A stop-limit order is di"erent from a

bracket order since it primarily focuses
on setting a stop price (when the order
becomes active) and limit price for a
single order.

Disclosure
Coinbase o"ers simple and advanced
trading. Advanced trading is for
experienced traders and is subject
to the Trading Rules. Fees on the two
platforms vary. Content is for
informational purposes and is not
investment advice. Investing in crypto
comes with risk.

Further reading

KEY TERM

What is an order book?

KEY TERM

What is technical analysis?

ADVANCED GUIDE

How to read advanced trading charts

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