An order is executed when a buy order matches a sell order or vice versa. The orders that are in the order book are pending orders waiting to be executed, and the price of each order in the order book is the limit price that a user is willing to accept.
A price in a purchase order is the limit price at which the user is willing to buy; On the other hand, in a sell order, it is the limit price at which the user is willing to sell. Therefore, these orders are not executed if there is no equal or better price and are called "Limit Orders."
Instead, if a user wants to complete a purchase as quickly as possible, they must complete their purchase order with the available sales orders in the order book but at their respective prices; the same will happen with a sell order, which will be filled with purchase orders from the order book at their respective prices. These types of orders are called "Market Orders."
Next, we will review when an order will be completed (this does not apply to market orders) by comparing the order price to the current price, also known as the "Last Price."
Is the top price in an order book the same as the last price?
The highest price in an order book and the last price are related but not necessarily the same. The last price refers to the price at which the most recent trade occurred and represents the current market price. The last price may be equal to the highest price in an order book, but this is not always the case.
|HOW ARE ORDERS EXECUTED?|
|MARKET||Takes the first positions in the order book, from top to bottom.||Takes the first positions in the order book, from top to bottom.|
|LIMIT||Last price is equal to or less than.||Last price is equal to or greater than.|
|STOP LIMIT - STOP PRICE||Last price is equal to or greater than.||Last price is equal to or less than.|
|STOP LIMIT - LIMIT PRICE||Last price is equal to or less than.||Last price is equal to or greater than.|
|STOP LOSS||Last price is equal to or greater than.||Last price is equal to or less than.|
In market orders, the final price could be drastically different, although they are quickly executed. Therefore, market orders are generally subject to Slippage. If you don’t want to experience price changes, we invite you to learn more about limit orders. To learn more about Slippage, click here, and for Limit orders, click here.
IMPORTANT: We reiterate that there are a lot of risks in the trading market. We recommend reading our legal disclaimer of liability and risk here.