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Author Topic: Building a great Bitcoin exchange, part II: should all orders be limit orders?  (Read 751 times)
aes1
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April 17, 2013, 07:58:34 AM
 #1

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!
- Huh

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.
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Come-from-Beyond
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April 17, 2013, 08:31:05 AM
 #2

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!
- Huh

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.
Furyan
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April 17, 2013, 12:37:16 PM
 #3

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.
aes1
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April 18, 2013, 08:01:38 AM
 #4

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?. 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.)
codro
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April 18, 2013, 08:43:10 AM
 #5

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!
- Huh

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.
aes1
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April 18, 2013, 10:15:33 AM
 #6

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.
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