Utilizing VirgoCX Wealth can be a familiar experience for many – OTC Direct looks and functions like a traditional trading platform and offers many of the same features that a typical trading platform would offer. Along with being able to see real time pricing between some of the most in-demand trading pairs, you can trade just as quickly and easily as you would on the retail platform. With the platform’s new overhaul, users have access to an array of charting tools that empower trading decisions – to complement this, the update also brought the ability to place stop orders, alongside the already existing capabilities of being able to place limit and RFQ orders.
If you are transitioning from using a traditional exchange to OTC Direct, you may already have experience utilizing limit and stop orders; RFQ orders, however, are usually only provisioned by institutional investors. This article will serve to break down the different types of orders you can place so that you can minimize your losses and maximize your investments.
Limit Orders and Stop Orders
Anyone that has had experience investing in both crypto or stocks probably have some level of understanding when placing limit and stop orders. Essentially, when placing either of these orders, you are telling the broker (or the exchange) that you do not want the current market price of the asset; rather, placing these types of orders allows them to be executed when the asset’s price matches one that you specify.
Although similar, between limit and stop orders, there are two main distinguishers: Limit orders are generally used to fulfill an order at a price that is either at or better than the price you specify, and stop orders are fulfilled exactly at a specified price point in the direction that the asset’s price is moving. Strategically utilizing both of these orders or a combination of the two (known as a stop-limit order) is essential to becoming a successful trader.
Limit orders
Limit orders can be used when buying or selling an asset. Say you wanted to purchase $500 worth of a coin at $500 or less, then a limit order would be set that would not be executed unless the price becomes equal to or less than when you specify it. In this case, you obviously cannot set a limit order above the going market price as a better price will always be available. Conversely, if you wanted to sell $500 worth of a coin for $600, then a limit order can be set that will only be fulfilled once the price is equal to or greater than your specified price point. It is important to note here that although the price of a limit order can be guaranteed, fulfillment of the order cannot; because limit orders are seen by the market, they require enough liquidity of a certain asset in order for the limit order to be executed.
Stop orders
There are a few variations of the stop order, but they are all dependent on a price that is not yet available. We mentioned that stop orders are made in the direction that the price of an asset is moving – if an asset is trending upward, then a stop order would be set above the current price, which the market would execute once the asset has reached that price point. If an asset is trending downward, stop orders are usually utilized as a failsafe to cut losses after a certain price point has been reached.
Stop-Limit orders
Combining the two, a stop-limit order has two price points: a stop price and a limit price. When placing this type of order, the exchange will activate a limit order to buy or sell an asset once a specific stop price has been met. For example, if you set a limit order to sell a coin for $700, then the order will be executed once the price hits $700. A stop-limit order takes this once step further, by only selling the coin for $700 if it has dropped from $750 to $710. This type of order is extremely advantageous during periods rapid price action, allowing an investor to cut their losses should their forecast be incorrect or if the asset’s price moves in an unexpected direction.
While limit and stop orders are extremely common in leverage trading and forex markets, they are incredibly valuable in crypto investing due to rapid price action of many digital assets. Some coins can see prices swing drastically over the course of a matter of hours, so using stop and limit orders can be advantageous to not just mitigate losses, but to also capture profits.
Request-for-Quote (RFQ) orders
Traditionally, RFQs are used by businesses to solicit suppliers and contractors to submit quotes and bids so that they can get services for certain tasks or projects. OTC trading, however, is unique in that transactions are large block (in VirgoCX Wealth’s case, CAD$50,000 or above), so RFQ orders may be necessary for transactions that are potentially much larger than that.
Fulfilling a large trade directly on an exchange comes with potential for price slippage and, as the order would be visible on the market, would allow short-sellers to profit off of this slippage. Placing an RFQ order notifies the OTC team that you want to execute this trade, allowing you to bid and ask for the best strategy to implement in order to make the trade happen. In this way, the investor can still benefit from a large block transaction while being protected from price slippage, as well as maintaining the equilibrium of the market.
Along with being able to fulfill traditional market-type orders like stop and limit orders, VirgoCX Wealth allows institutional investors to maximize their trading capability by also accommodating RFQ orders, meaning that a transaction can happen regardless of how ambitious it may be.
To get started moving into the next level of trading with VirgoCX Wealth, contact us at [email protected] to get a demo.