What is a Trigger Order?
An order is an instruction to buy or sell at a trading place such as a stock market, market for shares, the market for commodities, the market for financial instruments or exchange for cryptocurrencies. These instructions can be easy or complicated and can be sent via direct market access to either a broker or directly to a trading venue. It is called a trigger order.
Trigger order
Suppose an investor in cryptocurrencies or stocks is willing to pay $20, and no more. In this case, the investor can set a trigger order of $20, at which the
cryptocurrency or stock will be purchased. As soon as the value of the cryptocurrency or share reaches this price, it will be bought automatically. The investor does not need to put in any more effort. The broker or crypto exchange is the one that takes care of this automatically.
With a trigger order, you can set a price at which a certain action can be executed. This action is always to buy or sell a cryptocurrency. This has advantages for both the buyer and the seller of the cryptocurrency. What happens is that when setting a trigger order on a previously determined price, a
market order is executed. This means that the selling or buying price might differ from your entered price level.
The biggest advantage of a trigger order is that buyers of a cryptocurrency do not overpay for a cryptocurrency. Suppose you want to pay a maximum of $400 for a cryptocurrency, and the current value is $430. You can choose to pay more or set a trigger order. On a crypto platform like Coinmerce, you then set it to automatically buy the crypto coin when it reaches a value of $400. If that happens, Coinmerce will purchase the cryptocurrency for you. You don't have to do anything for this yourself.
Trigger Orders on the stock market
The trigger order comes in kind from the stock market. This is where the trigger order originated. Here investors can buy shares at a certain price, which is better for the buyer of the share. Investors can also use a trigger order to sell their shares again.
It is not the case that trigger orders always guarantee a positive effect. However, an investor has more control over the buying and selling of the shares of his choice.
This is how a trigger Order is used on the stock market
Suppose the portfolio manager wants to buy shares of Tesla Inc (TSLA) but finds the current price of $325 per share too high. Therefore, he would like to buy the shares at a lower price. He decides to set a trigger order at a price of $280 per share, and then wants to buy 10,000 shares. This means that the investor considers the stock undervalued when it reaches a price of $280. This order is not stopped until the investor cancels the order, or until the set time has expired.
Trigger orders for cryptocurrencies
Trigger orders are also used for cryptocurrencies. This type of order is becoming more and more popular, and therefore investors can invest in cryptocurrencies like
Bitcoin and
Ethereum more and more easily and specifically. Thus, you can also use different types of trigger orders at Coinmerce. We'll explain to you step by step how to do that at the end of this article!
Types of Trigger Orders
There are different kinds of trigger orders. These orders make sure that you can enjoy the advantages of trading stocks and cryptocurrencies even more. That's why it's important to know what the different orders are and what they imply. You will then make it a lot easier for yourself.
Trigger Sell Order
A trigger order to sell is exactly the same as a normal trigger order that you use for buying cryptocurrencies. However, you can also come across this type of trigger order under the name 'trigger sell order'.
Trigger Buy Order
When we use a trigger order to buy crypto coins, we also speak of a 'trigger buy order'. In fact, it is a normal trigger order that we use to buy cryptocurrencies.
Trigger Order vs. Market Order
When an investor places an order to buy or sell shares, he can do this in two ways: using a trigger order or using a market order. There is a big difference between these two types of orders, both in the stock market and in the crypto world.
Market Orders
Market orders are by far the most commonly used type of orders. When you use this type of order, you buy or sell your crypto coins for the market price that is in effect at the time. The market price can vary from one crypto exchange to another. On CoinMarketCap you can see an average of the market prices of cryptocurrencies on different crypto exchanges.
For example, you might decide to buy 1000
XRP coins. You think that the price of the exchange is the correct price, and therefore you want to open them as soon as possible. In this case, you place a market order, after which the coins are purchased at the current market price.
Although market orders offer great commercial opportunities, there is no guarantee that they will actually succeed. All exchange transactions are subject to the availability of the shares on offer and can vary significantly depending on the time of day, order size and stock availability. All orders are processed within the current priority guidelines.
Whenever a market order is placed, there is always the threat of market fluctuations occurring during the time the seller receives the order and the time the transaction takes place. This is especially true for large orders that take a long time to process.
Trigger Orders
The difference between triggers orders and market orders is probably clear to you by now. With trigger orders, you can set in advance the price at which you want to buy or sell a cryptocurrency, while with market orders you buy or sell the cryptocurrency at the market price. Both types of orders have their advantages and disadvantages. The type of investor you are determines which order suits you best.