Why Bitcoiners Need To Learn To Use Limit Orders

Using limit orders to buy Bitcoin

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The art of stacking sats is a simple one; when you have the free cash flow you don’t plan on spending any time soon and want to store it someplace, you can choose to keep it in Bitcoin instead. Most new sat stackers either make large one-time purchases at price points they like or split their purchases daily, weekly, or monthly and try to dollar cost average their way to a certain amount. 

If you have already started to denominate your life in satoshis, your end goal is probably not to have more fiat but to have more Bitcoin each month. 

If your goal is to secure as many sats as you can for your fiat, you need to learn to play the volatility of the Bitcoin price. Market news, investor sentiment changes, FUD, company balance sheet rebalancing or traders taking profits happen each month. These are opportunities to stack more sats, but who has time to follow all that drama? 

I know I don’t. I have a full-time job that keeps me pretty busy; I need it to continue to secure fiat, and the opportunity cost of monitoring the news and charts is not worth it for me. I would much rather work and earn an income I can use to plough into Bitcoin each month. 

So how do you take advantage of price drops? Well, with the help of limit orders. Many new Bitcoiners don’t know this option exists and often rely on the spot price for the day to secure their Bitcoin, but there are other ways of buying Bitcoin at a price you prefer. 

So what is this limit order option, and how does it help you? 

What Is a Limit Order?

A limit order is a purchase where you, the buyer, picks a specified price to part with your fiat and secure Bitcoin. You can use limit orders on both the buy-side and the sell-side, but for me, I only use the buy-side. 

  • A buy limit order will be executed when the market price drops to the limit price you set or a lower one.
  • While for sell limit orders, the order will be executed only at the limit price or a higher one. 

This stipulation allows traders to better control the prices they trade. By using a buy limit order, the buyer is guaranteed to pay that price or less. Your limit order can be completely filled or partially filled depending on how many sales are executed in that range. 

For example, if I had a limit order for 1 BTC (100 million satoshis) at a specific price, but only 0.5 (50 million satoshis) were sold at that range, my limit order would only be filled by 50%.

What happens if my limit order price is not reached?

While the price is guaranteed, the filling of the order is not, and limit orders will not be executed unless the security price meets the order qualifications. If the asset does not reach the specified price, the order is not filled, and the investor may miss out on the trading opportunity.

This is why it’s essential to review the order book of the exchange you’re using, and the various ranges Bitcoin trades at during that month before setting your limit orders. You want to place it in a range where you think Bitcoin could drop within a certain period, so be realistic and do your research. 

Limit orders like dollar-cost averaging help set the floor and reduce the volatility as buy walls are placed for any panic sellers to crash into should there be a correction downward. 

Important to note

  • A limit order guarantees that an order is filled at or better than a specific price level.
  • A limit order is not guaranteed to be filled, however.
  • Limit orders control execution price but can result in missed opportunities in fast-moving market conditions.

How Do Limit Orders Work?

A limit order is the use of a pre-specified price to buy or sell Bitcoin. For example, if a trader is looking to buy Bitcoin but has a limit of $45 0000, they will only buy the Bitcoin if the price hits $45 000 or lower. 

By using a buy limit order, the investor is guaranteed to pay the buy limit order price or better. Depending on the exchange you’re using, they may have a specified value you need to set, for example, $50 minimum to create a limit order, so check with the exchange you plan on using first to set limit orders that are within your Bitcoin buying budget.

In some exchanges, you can also set a limit orders that can be left open until filled, while others can be set with an expiration date. If your limit order isn’t filled, you can cancel it or allow it to expire and receive your capital back, to set a new order. 

Where Can I Set Limit Orders?

You can use both centralised or decentralised exchanges that offer you an order book. An order book lists all the buy/sell orders of a particular cryptocurrency. A buy order is known as a bid, while a sell order is known as an ask. The order book maintains the numbers of tokens that are being asked or bid at a particular price point.

Learn To Maximise Your Sat Stacking

I use both; I set aside a certain amount of cash I am willing to invest in Bitcoin each month. I then take 80% of that amount and spread it evenly over the 30-31 days of the month and then take 20% to set limit orders I think will be the floor for that month. Ultimately that is a guessing game; not all my limit orders are filled each month. 

The cash I have leftover, I will either use to set new limit orders next month or buy at spot at the end of the month. Then repeat the process for the next month. 

For me, It’s been a great way to catch the occasional dip and ensure I end up with slightly more satoshis than I would have come the end of each month. 

Disclaimer: This article should not be taken as, and is not intended to provide any investment advice. It is for educational and entertainment purposes only. As of the time posting, the writers may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency, as all investments contain risk. All opinions expressed in these articles are my own and are in no way a reflection of the opinions of The Bitcoin Manual

3 Responses

  1. I was stacking every day on the daily auto-buys but the fees were wracking up so much so I decided to slow down to setting weekly buy limit orders a little bit below current market price which drastically reduces the fees. It also means I have a little more dry powder ready to load up in case there’s another epic fire sale. It’s definitely worth having the knowledge to do limit buy orders, can save yourself a lot on fees and catch some cheap sats in the process.

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