Learn the Complicated or Die. What Order Types Do Traders On Exchanges Need?

Crypto traders are increasingly opting for more complex orders, according to a recent study by KickAcademy. 

April 14, 2020
By Anti Danilevski, Founder & CEO of Kick Ecosystem

In the crypto world, exchange orders are not very different to those that emerged at the very dawn of traditional fiat exchanges. However, as the industry has developed and responded to market demands, orders that differ from traditional ones have emerged.

While orders on cryptocurrency exchanges are no longer a new phenomenon, they continue to remain extremely relevant. For professional traders operating with large volumes, the presence of a particular order is often critical in the selection of an exchange. However, in the beginning of any trading journey, employing complex order types may not be worthwhile. Instead, diligent study of the market, along with the pitfalls of trading strategies, will likely prove more beneficial.

According to a recent KickAcademy study, a third of respondents from more than 100 countries noted that using complex order types strongly affected trading profitability. Other important factors when selecting an exchange include additional order functions and the convenience of the user interface. In general, despite the fact that the demand for “classical” orders remains amongst crypto enthusiasts, the demand for complex trading instruments has significantly grown.

To gain a greater understanding of what traders believe is lacking on exchanges, we will take a deeper look at the study’s results.

 

General statistics

Interestingly, of the 1,716 active users of cryptocurrency exchanges surveyed, 30.4% reported continuously monitoring quotes without trading daily. At the same time, 30.1% reported trading between 1-3 hours a day. Thus, for more than 60% of users, orders are an essential tool for trading.

Despite the growing trend in the use of complex orders, it can be seen from the voting results that traditional and easy-to-use exchange-traded instruments remain in high demand. Thus, 23.4% of respondents almost always use limit orders, 33.9% said they used them sometimes, and only 9.6% of respondents reported not needing them.

A similar situation was seen with market orders. 18.9% reported almost always using them, while 43.8% said they resorted to them occasionally. It is worth noting that limit and market orders are classic tools for trading on exchanges and their credibility is unlikely to be undermined soon.

For user convenience, exchange developers can create more flexible and comfortable order settings. They can offer the addition of new parameters, such as the time of order activation or cancellation, options for full, partial or instant execution, membership in a taker or maker, and so on. Amongst those respondents with the facility to use additional parameters when placing orders, 75% reported doing so.

 

Let’s complicate the task

Stop orders are an irreplaceable tool to fix profit and prevent the loss of large positions. As the study shows, such practices are not just a theory, but a popular method of traders. Among respondents with knowledge of how to use stop orders, only 15% reported never using them, and 14.3% reported always using them.

Trailing stop orders are not available on all crypto exchanges, but traders who have the opportunity to set them actively use them for trading. For example, the new KickEX crypto-exchange has trailing stop orders and double stop orders, expanding the capabilities of traders.

Another popular order is the facility to place several orders (for example, “One-Cancels-the-Other”), though it is not available on all cryptocurrency exchanges. This functionality allows traders to set several orders at once, in one interface, in order to quickly and conveniently create logic for the position gained. This allows making a profit or minimizing losses with only one reserve made for the entire order system, rather than having to make a reserve for each order. Traders with access to this functionality reported using it frequently, with 8.2% of respondents saying they used it every time.

It emerged from the study that respondents use the function of placing order grids, allowing the setting, in one interface, of price and quantity intervals of a crypto asset. This function quickly and conveniently facilitates the placing of several orders at once, crucial when developing a trading strategy.

 

What can a trader not live without?

Every third participant in the study noted that the use of complex orders and additional functionality significantly affects the profitability of a trade.

Almost half of the respondents reported having difficulties in mastering their functionalities and mechanics. This suggests that if cryptocurrency exchanges devote more to educating traders, this will stimulate greater numbers to become more active.

Perhaps the most obvious result gleaned from the survey was that 75%(!) of participants reported that they consider a large selection of functionalities on an exchange to be one of the most important criteria when deciding where to trade.

Participants were asked to choose one or more options of a functionality they would like to see on the exchange where they trade. As noted earlier, many traders actively use many of the mechanics, so it followed that the opinions of respondents would be similarly divided. However, around one fifth of respondents said they would like to add complex orders, and another fifth expressed a preference for adding trailing ones.

If exchanges are to retain their traders, it is clearly necessary to focus not just on supporting classic orders, but to also initiate the development of new tools that can respond to changing market demands. The KickEX crypto exchange is one such example of an exchange that has successfully implemented complex orders. Here, advanced traders have options of double stop orders and trailing stop orders, as well as a smart cashback function that covers up to 100% of trading commissions, and a referral program for additional income.

The availability of these more complex orders is not just good for exchanges, but for traders, too. Those more conservative traders with a lingering preference for classic orders would do well to consider the introduction of new complex orders into their trading strategies. As we have seen, such orders enable more sensitivity and flexibility, increasing the potential for profits to move to a whole new level.