Binance Order Types Explained for Dummies

Imagine you’re at a marketplace where you want to buy and sell apples. Each order type represents a way to buy or sell apples with different rules.

1. LIMIT ORDER

You tell the seller, “I only want to buy apples if the price drops to $2 each or lower.”
You set the price, and the trade happens only if someone agrees to sell at your price or better.

Example:

You want to buy 5 apples but only if each apple costs $2 or less. If apples are currently $3, your order waits in line until someone agrees to sell at $2 or lower.

Pros:

• Control: You set the price.
• Useful for buying/selling at specific prices.

Cons:

• Might take time: If no one agrees to your price, the trade won’t happen.

2. MARKET ORDER

You say, “I want to buy apples now, no matter the price!”
You don’t care about the price; you just want the apples immediately.

Example:

Apples are being sold at $3. You want 5 apples, so you pay $15 instantly, even if it’s a bit expensive.

Pros:

• Fast: Your order is filled immediately.
• Great for urgent trades.

Cons:

• No price control: You might pay more than you expected, especially if the market is volatile.

3. STOP-LOSS

You say, “If apples drop below $2, sell mine automatically to prevent more loss.”
This is a way to cut your losses when the price goes down.

Example:

You bought apples at $3 each. If the price falls to $2, your apples are sold to avoid further losses.

Pros:

• Protects you from big losses.
• Automatic: You don’t need to monitor prices constantly.

Cons:

• No control over the exact selling price: If the price drops quickly, you might sell at a much lower price.

4. STOP-LOSS LIMIT

You say, “If apples drop to $2, sell them, but only if I get $1.80 or more for each.”
This combines a stop-loss with a limit order. You set a trigger price ($2) and a minimum selling price ($1.80).

Example:

You bought apples at $3 each. If the price falls to $2, your order triggers, but it will only sell if someone offers $1.80 or more.

Pros:

• Protects you from selling too low.
• Gives you more control over selling price.

Cons:

• If no one agrees to your limit price, your apples won’t sell, and you might lose more.

5. TAKE-PROFIT

You say, “If apples rise to $5, sell mine automatically to lock in profits.”
This helps you sell automatically when prices go up.

Example:

You bought apples at $3 each. If the price rises to $5, your apples are sold to secure your profits.

Pros:

• Locks in profits automatically.
• No need to monitor prices constantly.

Cons:

• No control over the exact selling price: If the price jumps suddenly, you might sell at a lower price than expected.

6. TAKE-PROFIT LIMIT

You say, “If apples rise to $5, sell them, but only if I get $4.80 or more for each.”
This combines a take-profit order with a limit. You set a trigger price ($5) and a minimum selling price ($4.80).

Example:

You bought apples at $3 each. If the price rises to $5, your order triggers, but it will only sell if someone offers $4.80 or more.

Pros:

• Locks in profits while giving you price control.
• Useful in volatile markets.

Cons:

• If no one offers your limit price, the trade won’t happen, and the price might drop again.

7. LIMIT MAKER

You say, “I want to buy apples at $2 each, but I don’t want my order to be completed immediately.”
This ensures your order stays on the order book as a limit order and helps you avoid extra fees.

Example:

You want to buy 5 apples at $2 each. Your order is placed on the marketplace for others to see, but it won’t match immediately with any existing orders.

Pros:

• Lower fees: You pay less because you’re “making” liquidity.
• Price control: Your order stays on the order book.

Cons:

• Might not get filled if no one agrees to your price.

Summary Table:

If you think of trading as buying and selling apples, these order types are just different strategies to manage your trades in a way that suits your goals. 😊

Happy Trading 👍