Cease orders are much like, however distinct from, restrict orders. The place restrict orders are literally on the order guide, cease orders are solely positioned when the predefined worth is reached, and so they can be utilized at the side of market or restrict orders.
The excellence is delicate, however the important thing distinction is that restrict orders are already positioned on the order guide and may be seen by anybody, whereas cease orders aren’t even submitted till the circumstances are met. They are often set as much as place a market or restrict order, which may give merchants elevated flexibility.
Principally, a cease market order says, “If the value reaches X, purchase/promote instantly.” This doesn’t imply you’ll essentially get the value of X, however when that worth is reached, a market order is instantly positioned to purchase at one of the best present worth. Alternatively, a stop-limit order says, “If the value hits X, place an order to purchase/promote at Y.” Be aware that X and Y may be the identical worth, however they don’t need to be. So, you may theoretically have a commerce that goes, “If Bitcoin hits $10,000, place an order to purchase it, however solely on the worth of $10,000.” Alternatively, you may set it up as follows: “If Bitcoin hits $10,000, place an order to purchase it, however solely at $10,100.” By combining these layers of instruction, merchants can create advanced methods and handle threat extra successfully.