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Title: Building a great Bitcoin exchange, part II: should all orders be limit orders? Post by: aes1 on April 17, 2013, 07:58:34 AM Exchanges commonly have two options for buying and selling: limit orders (executed only at the specified price or better) and market orders (executed immediately or not at all).
So, a stupid reductionist idea: why do we need the two different types? Why not just use limit orders? Pros: - it would make the user interface simpler - the user wouldn't have to think of options - it would make the trade engine simpler (and therefore easier to optimize, verify, and test) Cons: - but that's not what we are used to! - ??? The user interface would, by default, calculate the price which is needed for the limit order to be executed completely at a high probability (i.e. the market doesn't suddenly move into the wrong direction), and have that set as a default. And that's a "market order" for you. Title: Re: Building a great Bitcoin exchange, part II: should all orders be limit orders? Post by: Come-from-Beyond on April 17, 2013, 08:31:05 AM Exchanges commonly have two options for buying and selling: limit orders (executed only at the specified price or better) and market orders (executed immediately or not at all). So, a stupid reductionist idea: why do we need the two different types? Why not just use limit orders? Pros: - it would make the user interface simpler - the user wouldn't have to think of options - it would make the trade engine simpler (and therefore easier to optimize, verify, and test) Cons: - but that's not what we are used to! - ??? The user interface would, by default, calculate the price which is needed for the limit order to be executed completely at a high probability (i.e. the market doesn't suddenly move into the wrong direction), and have that set as a default. And that's a "market order" for you. We need stop orders. Most of traders can't afford to buy/develop a trading bot and can't sit in front of monitor 24/7. Title: Re: Building a great Bitcoin exchange, part II: should all orders be limit orders? Post by: Furyan on April 17, 2013, 12:37:16 PM We need stop orders. Most of traders can't afford to buy/develop a trading bot and can't sit in front of monitor 24/7. This. I care far more about this than limit vs market orders. They're tools, and both are useful and necessary. The lack of stop orders on any exchange is a travesty. Title: Re: Building a great Bitcoin exchange, part II: should all orders be limit orders? Post by: aes1 on April 18, 2013, 08:01:38 AM We need stop orders. Most of traders can't afford to buy/develop a trading bot and can't sit in front of monitor 24/7. This. I care far more about this than limit vs market orders. They're tools, and both are useful and necessary. The lack of stop orders on any exchange is a travesty. Did you already take a look at Kraken (https://www.kraken.com/)?. It's in private beta right now, but you can request an account if you're interested. They have plenty of options for closing the trade, including stop-loss, take-profit, stop-limit and about 7 others. Looks quite promising if you're the pro-trader type. (I'm not affiliated with Kraken, just participating in the beta.) Title: Re: Building a great Bitcoin exchange, part II: should all orders be limit orders? Post by: codro on April 18, 2013, 08:43:10 AM Exchanges commonly have two options for buying and selling: limit orders (executed only at the specified price or better) and market orders (executed immediately or not at all). So, a stupid reductionist idea: why do we need the two different types? Why not just use limit orders? Pros: - it would make the user interface simpler - the user wouldn't have to think of options - it would make the trade engine simpler (and therefore easier to optimize, verify, and test) Cons: - but that's not what we are used to! - ??? The user interface would, by default, calculate the price which is needed for the limit order to be executed completely at a high probability (i.e. the market doesn't suddenly move into the wrong direction), and have that set as a default. And that's a "market order" for you. A market order is either a sell at $0 or a buy at $inf as far as the trading engine is concerned. You won't be selling at 0 or buying at $inf because it matches bids so you get the best deal. However, there's no extra complexity in a market order. Title: Re: Building a great Bitcoin exchange, part II: should all orders be limit orders? Post by: aes1 on April 18, 2013, 10:15:33 AM A market order is either a sell at $0 or a buy at $inf as far as the trading engine is concerned. You won't be selling at 0 or buying at $inf because it matches bids so you get the best deal. However, there's no extra complexity in a market order. Yes indeed. Thanks for pointing that out. I was trying to make the situation overly complex by thinking about doing a fill-or-kill instead of an actual market order. That's probably not necessary at all. |