2.4 Overview of Primary Order Types on Electra

Market Orders:

• Description: A market order is an instruction to buy or sell an asset at the current market price available on the exchange. This type of order is executed immediately by matching with existing limit orders in the order book.

• Advantages: Instant execution.

• Disadvantages: Potential for slippage, especially in low-liquidity markets.

Limit Orders:

• Description: A limit order is an instruction to buy or sell an asset at a specified price or better. It does not execute immediately but is placed in the order book, waiting for a matching order to meet its conditions.

• • Buy Limit: Purchase at the specified price or lower.

  • Sell Limit: Sale at the specified price or higher.

• Advantages: Control over the execution price.

• Disadvantages: Execution is not guaranteed if the market does not reach the specified price.

Stop-Limit Orders:

• Description: A stop-limit order combines a stop order and a limit order. It is activated when the market price reaches the specified stop price, triggering the creation of a limit order at the specified execution price.

• • Example: Stop price: $10,000. Limit price: $10,050. When the asset price reaches $10,000, a limit order is placed to buy/sell at $10,050.

• Advantages: Flexibility in risk management and trade automation.

• Disadvantages: The order may not fully execute if the market moves quickly beyond the limit price.

These order types provide traders with flexibility and control over their trades, enabling adaptation to various market conditions. Selecting the appropriate order type depends on your strategy, goals, and current market situation.

Stop-Loss (SL):

• Description: A stop-loss is an order that automatically closes your position when the price reaches a specified level to limit potential losses.

• How it works: Set a price level below (for long positions) or above (for short positions) the current market price. Once this level is reached, the position is closed.

• Advantages:

• • Protects capital from excessive losses.

  • Automates risk management even when you’re away from the terminal.

Take-Profit (TP):

• Description: A take-profit order automatically closes your position when the price reaches a target level, locking in profits.

• How it works: Set a price level above (for long positions) or below (for short positions) the current market price. Once this level is reached, the position is closed.

• Advantages:

• • Locks in profits at a pre-defined level.

  • Mitigates risks associated with price pullbacks after hitting the target.

General Points:

• SL/TP orders can be set when opening a position or edited later.

• SL/TP are executed at market price to ensure prompt execution once the specified level is reached.

• Both SL and TP orders can be set simultaneously for comprehensive position management.

Example:

• You have a long position on BTC, opened at $30,000.

• • You set a Take-Profit at $35,000 (+$5,000 profit).

  • You set a Stop-Loss at $28,000 (-$2,000 loss).

• If the price reaches $35,000, your position automatically closes with a profit. If the price drops to $28,000, your position closes to limit losses.

These tools allow traders on Electra to effectively manage their positions, minimize risks, and lock in profits.