Core order types and when to use them

Market orders

Market orders guarantee immediate execution but not price. Use them for small-sized trades where speed matters and order-book depth can absorb the size without large slippage. Avoid market orders for large fills or thinly traded altcoins.

Limit orders

Limit orders control price and avoid taker fees when set as maker. Use limit orders to reduce slippage and to build positions gradually. Pros: price control, lower fees. Cons: may not fill if the market moves away.

Post-only & Maker-only

Post-only orders ensure you join the order book as a maker. Valuable on CEXs with maker rebates or when you want to avoid taker fees during large orders. Use them when you can accept partial fills or delayed execution.

Immediate-or-cancel (IOC) and Fill-or-kill (FOK)

IOC fills whats available immediately and cancels the rest; FOK requires the entire size to fill or cancels. Use IOC for opportunistic entries; FOK when you need full execution at once to satisfy a strategy constraint.

Iceberg/Hidden orders

For large orders, iceberg orders split a large size into visible smaller chunks on-book, limiting information leakage. On many CEXs this is a paid or premium feature; use it when you dont want to advertise a large intent.

Execution strategies for different trade sizes

Small retail trades (under 1% ADV)

For typical retail sizes, simple rules work: prefer limit orders, use post-only when possible, and set reasonable time-in-force (TIF). If liquidity is deep, market orders are fine for speed. Always review fee tiers on your exchange (maker vs taker fees) and use pools with tight spreads.

Medium trades (1% to 10% ADV)

Here you should consider time slicing and TWAP/VWAP execution. Time-weighted average price (TWAP) spreads your order evenly across a time window. Volume-weighted average price (VWAP) tracks market volume to execute more when market volume is higher. Both techniques reduce market impact versus a single shot market order.

Large trades (10%+ ADV)

Large orders require a full execution plan: use iceberg orders, algorithmic execution, or OTC desks. Consider OTC if on-book liquidity is insufficient. On-chain, split across DEX pools and use routing algorithms to avoid heavy slippage on any one pool. Always pre-calculate expected VWAP and potential adverse selection costs.

CEX vs DEX execution: practical differences

Centralized exchanges (CEXs)

CEXs provide order books, advanced order types, and often high liquidity for major pairs like BTC/USDT and ETH/USD. Execution considerations:

• Maker/taker fee structure: use maker orders when possible to save fees.
• Smart order routing: many platforms route to several internal liquidity sources; verify slippage settings before executing large orders.
• Post-only and iceberg features to manage information leakage.
• In Canada, platforms like Bitbuy and Newton are popular for spot retail; check their order types and fee schedule before assuming advanced features are available.

Decentralized exchanges (DEXs)

DEXs use liquidity pools and AMMs; execution is a function of pool reserves, swap fees, and on-chain gas costs. Key differences:

• Price impact is explicit: larger swaps move the pool price according to the constant-product curve.
• Slippage tolerance: set carefully to avoid sandwich attacks or failed transactions.
• Routing: use aggregators or multi-route swaps to split across pools and minimize price impact.
• Gas & MEV risk: high gas fees can make many small trades uneconomic; private relays or MEV-aware routing can reduce front-running.

A worked example: Buying 1 BTC with minimal slippage

Imagine BTC price is $50,000 and the visible order book on your chosen CEX has these top-of-book bids and asks (simplified):

Ask offers: 0.2 BTC @ 50,000; 0.3 BTC @ 50,100; 0.5 BTC @ 50,200. Total visible ask depth for 1 BTC = 1.0 BTC. If you place a market buy for 1 BTC, your volume-weighted average price (VWAP) would be:

VWAP = (0.2*50,000 + 0.3*50,100 + 0.5*50,200) / 1 = 50,130

Thats a realized slippage of $130 relative to mid-price. To reduce this cost:

• Use limit orders at or slightly above 50,000 to capture passive liquidity.
• Slice the order: 0.25 BTC every 10 minutes (TWAP) to let other market participants add liquidity.
• Use post-only for the first slice to ensure maker fees.

If the market moves up during your slices, you might miss fills; balance urgency against cost.

Quantifying slippage and planning ahead

A straightforward way to estimate slippage is to model your order against the order-book depth or AMM pool reserves. For order-book assets calculate the expected VWAP as shown above. For AMMs, approximate price impact with the constant product formula: a swaps price impact grows non-linearly with size relative to pool liquidity.

Practical rule: limit a single execution to a small percentage of top-of-book depth (e.g., 20% of visible top 5 levels) and slice the rest. Track average daily volume (ADV) and avoid executing more than small fractions of ADV without a formal execution algorithm.

Protecting execution on-chain: slippage, gas, and MEV

On-chain execution requires additional precautions:

• Set conservative slippage tolerance to avoid sandwich attacks; lower tolerances reduce front-running risk but increase failed transactions.
• Time gas price: submitting transactions during lower congestion windows reduces costs and MEV exposure.
• Use aggregators or private relays when available for large swaps to obtain better routes and avoid public mempool exposure.

If trading volatile altcoins on DEXs, consider splitting swaps across pools and checking quoted output on multiple routers to find the best realised price.

Behavioral tips for better execution

• Plan your execution before placing the first order: decide on acceptable slippage and TIF.
• Avoid FOMO market orders during breakouts; check depth and recent trades.
• Be patient with limit orders, especially in range conditions. If a limit order misses across several attempts, reassess sizing and signal validity.
• Maintain an execution journal: track expected vs realised VWAP, slippage, fees, and why you chose your strategy.
• Automate repeated execution patterns with APIs or algos to remove emotional errors—just ensure robust error handling and safety checks.

Checklist: Pre-trade execution plan

1. Determine trade urgency and acceptable slippage (bps or $ amount).
2. Check ADV and order-book/AMM depth across primary venues.
3. Choose order type: limit, post-only, TWAP, or OTC if large.
4. Set fee considerations: maker vs taker, on-chain gas, aggregator fees.
5. Decide on routing: single venue, split across venues, or DEX aggregator.
6. Monitor fills and be ready to abort or adjust if market moves unfavourably.

Conclusion

Execution is a core, repeatable skill for crypto traders. Small improvements in slippage, fees, and timing compound across trades and can materially increase long-term returns. Use the right mix of order types, algorithms, and venue choices for your trade size and strategy. For Canadian and international traders alike, knowing local exchange features, fee models, and on-chain risks helps you execute smarter—without resorting to riskier market orders or guessing. Build a simple execution playbook, track results, and iterate: that discipline separates good traders from lucky ones.