Market Orders are a blank check to liquidity providers, says exchange CEO

Market Orders are a blank check to liquidity providers, says exchange CEO

You should always use a limit order when trading on crypto exchanges to ensure you are getting the best possible price for your money, according this chief executive.

Speaking about liquidity spread on the order books at CoinMetro, Kevin Murcko gave insight to how dynamic market makers operate and tips on how to always ensure you are getting the price you expect, regardless of which platform you trade on:

“No matter how liquid an asset is, never use market orders unless you have to. I don’t care what market you’re trading in – equity, stocks, bonds, you’re buying Tesla stock; don’t market buy it,” says Murcko.

“What you’re telling the market when you use a market order is: fill me at any price, I don’t care. If you broke down the code, that’s literally what it says: here’s a blank check just do whatever you want.”

“Don’t ever do that, always use limit orders. Limit orders are telling the market I want this price or better – it’s you negotiating with the market. Always negotiate. Buy wholesale, don’t buy retail.”

The term “liquidity” refers to how many buy and sell orders are active on the books, which translates to how much money is available at a point in time. When there are not a sufficient amount of buy and sell orders, the market price will fluctuate between the next available limit order as traders using market orders are forced to accept the closest bid or ask.

More participants in a market leads to more competition among traders, which reduces the spread between buy and sell limit orders. Strong liquid markets will have a spread of less than a fraction of a percent, while less liquid markets could have spreads of several percent.

“You can even set limit orders inside the spread, they will immediately fill but you’re guaranteed not to get a worse price,” Murcko said while explaining how the CoinMetro liquidity providers operate. “No matter how much liquidity we get over time…do not make don’t make the mistake of using market orders.”

So why do market orders exist? The CoinMetro boss says they should only be used in an emergency situation:

“Only when you have to; and I mean when you need to exit a position because, you know, you’re about to just get wrecked or whatever, but don’t ever enter the market if you don’t have to on a market order.”

Kevin Murcko is the CEO of CoinMetro, a small but growing centralized digital asset exchange based out of Estonia. Their native utility token, CoinMetro Token (XCM), has seen explosive growth this year after climbing nearly 900% at time of writing.

Each week, Murcko does a live AMA session on YouTube to better connect with his customers and provide more transparency into how the growing exchange operates. He also encourages viewers to ask other questions related to the digital asset space, in addition to sharing his opinions on various crypto startups.