Amdax offers a range of trading options, including trading at the current market price, placing a limit order, and trading with a price guarantee. For each order, you choose the trading method that best suits your preference and the current market conditions.
What is the difference between market price, limit order, and price guarantee?
- Market price: your order is executed at the current market price at the time of execution.
- Limit order: you set a price in advance and the order is only executed when the market reaches that price.
- Price guarantee: you trade at a predetermined price that remains valid for a limited period, regardless of any price movements in the meantime.
Advantages and disadvantages of market orders
The main advantage of a market order is speed of execution. It offers a high degree of certainty that the transaction takes place immediately, without any delay. This is particularly beneficial when trading highly liquid assets, where price differences between consecutive transactions are usually minimal.
On the other hand, the execution price of a market order can vary, as it depends on the availability of buyers and sellers in the market. In volatile market conditions, market orders may be executed at unfavourable prices, especially when trading less liquid assets.
Advantages and disadvantages of limit orders
One of the key advantages of limit orders is price control. Traders can strategically set price levels based on their market analysis and individual trading strategies. Limit orders are especially useful when trading less liquid assets, where obtaining a reliable market price can be more difficult.
A potential disadvantage of limit orders is that execution is not immediately guaranteed. If the specified price falls outside the current market range, the transaction cannot be executed until the market price reaches that level. This can result in missed trading opportunities if the market price changes rapidly.
Advantages and disadvantages of price guarantee orders
Price guarantee orders give traders the certainty that a transaction will be executed at a predetermined price, regardless of market movements at the time of execution. When placing the order, the price is held for you for a few seconds. As a result, you may end up paying more or less than the current market price. Amdax takes this price fluctuation risk entirely off your hands. In return, a risk premium is applied, which enables Amdax to bear the market risk between the acceptance and execution of the order.