How do crypto exchanges work?

Cryptocurrency exchanges have become an integral part of the digital economy. The main trading operations with crypto assets take place through them, prices are formed, cryptocurrency liquidity is ensured, and it is here that trading orders are realized. In order to effectively use trading opportunities and minimize risks, it is important to understand how crypto exchanges work, what orders are available and in which cases it is worth using market close.

What is a market close

Closing on the market is the immediate completion of a trading position at the current market price. This operation is performed with the help of a so-called market order, which is executed immediately, unlike a limit order. This approach is especially relevant in situations where it is important to quickly fix the result of the transaction - whether it is a profit or a loss. Market closing is used both manually and in automated strategies, including trading bots, where the market closing function is also available.

Difference between a market order and a limit order

The main difference between a market order and a limit order is the control over the execution price. A market order implies that you agree to the current price in the order book, even if it differs from the desired price. Such an order is executed instantly, absorbing the available liquidity. At the same time, you cannot accurately predict the price at which the trade will occur in a high volatility environment where slippage can occur.

On the other hand, a limit order allows you to specify a specific price at which you are willing to buy or sell an asset. This gives you control over the trade but does not guarantee its execution, especially if the market has not reached the specified level. Strategies with high reaction times, such as automated trading, often favor market orders, especially when closing out a position.

When “market close” is used

Market close becomes relevant in several scenarios. First of all, it is used in moments of sharp price movement when a quick reaction is required, for example, when a support or resistance level is broken, or when important news is released that can affect the exchange rate. In these cases, speed is more important than accuracy, and the trader consciously goes for possible slippage to avoid even greater losses.

In addition, this method of closing is used to realize stop-losses on the market, because there are situations where a limit order may simply not work. In automatic strategies, market closing is used when the conditions for exiting a position are triggered, for example, when a specified loss is reached, or when a trading cycle is completed. This allows you to retain flexibility in risk management and better control the outcome.

How a market order works on a cryptocurrency exchange

A market order is one of the simplest and fastest tools in trading on cryptocurrency platforms and financial markets in principle. Its main feature is that it is executed instantly at the current market price. When a trader chooses to close a position via a market order, the system immediately buys or sells the asset at the most favorable available price in the orderbook.

In practice, this means that the exchange begins to automatically “eat” limit orders from the opposite side. For example, if you place a market sell order, it will be executed against the limit buy orders already placed, starting from the highest price. This mechanism provides instant execution, which makes it especially convenient in conditions of rapid change of trends or high volatility.

It is important to realize that market order does not guarantee the exact price of a deal - it only guarantees its speed. Because of this, slippage may occur when the actual execution price differs from the expected one, especially in case of low cryptocurrency liquidity or sudden changes in market conditions.

Examples of situations in which closing the market is advantageous

There are quite a few scenarios in which a trader can benefit from using the market close, especially if he/she is focused on speed of decision making and seeks to minimize losses. One of the most common cases is a reaction to a sharp market decline. When the price of an asset begins to decline rapidly, the limit order may simply not be executed, and the loss will continue to grow. In such a situation, a market order allows you to quickly exit the position and fix the loss before it becomes critical.

Another example is the use of a market stop-loss. In the settings of trading bots, closing by the market can be set as an automatic stop-loss at the current price. This is relevant for those who trade with high risk or use automatic trading in volatile market conditions. Instead of waiting for a limit stop to trigger, the trader instantly exits a losing trade, reducing risks.

Market closing is also beneficial in situations when a trader needs to free up funds to enter another more promising trade. For example, when a new signal from a trading bot or a short-term arbitrage window appears. In circumstances where speed is more important than price accuracy, trading on the market becomes the optimal solution.

In addition, trading bots on Bybit through the Veles Finance platform makes this feature accessible even for beginners. The user doesn't need to manually place orders or worry about the timing of the exit - the bot itself will assess the situation and, if necessary, close the trade instantly. This makes automated trading not only convenient, but also as safe as possible.

The market close function in Veles bot is not just an addition, but an important element of a trading strategy focused on capital protection. It is especially valuable in unstable market conditions and in strategies where speed of decision making is important. Therefore, if you haven't tested its capabilities yet, it's time to register on the platform and get a $5 bonus.

How trading bots use market close

Market close in trading bots is a very important feature that allows you to quickly close trades without delays. Unlike a trader who needs to monitor the situation and manually make a decision to close a position, a trading bot can react to price changes in a fraction of a second. When the market starts to move sharply against an open position, the bot applies a market order to exit the trade as quickly as possible, minimizing losses. This is especially relevant in the highly volatile crypto market, where the price can fly dozens of points in a few seconds.

Algorithms embedded in bots for trading analyze real-time data: orderbook, volumes, candles and other indicators. When one of the conditions is triggered, for example, a loss level exceeding the set limit is reached or a strong/historical level is broken, the bot instantly places a market order to close. This keeps the strategy alive and flexible, rather than mechanically tied to waiting for a limit order to be executed, which may simply fail at the time of a market crash.

When automatic closing is justified

Automatic market close is especially justified in scenarios where the speed of exiting a position is more important than price. One of the most obvious examples is protecting your deposit in the event of unpredictable price movements. If the market goes against a position and starts to accelerate, it becomes dangerous to wait for a limit order to be executed. In such cases, the trading bot can close the position according to the market, which will allow the trader to avoid a deep drawdown or liquidation.

Automatic closing is also used in arbitrage strategies, where even a small delay can level the profit. At the moment when the price difference between two exchanges disappears, the bot should close the trade instantly, without waiting for the exact price - otherwise the arbitrage logic will be broken.

Another case is grid trading, especially if we are talking about a compressed grid. If the price breaks the range boundaries, the bot can use a market price close to avoid getting into a situation where the orders in the grid no longer match the current market structure. Veles allows you to customize such conditions in detail, including adaptive stop loss levels by market.

The market close feature in the Veles Finance bot allows traders to act on their intended plans. It is especially useful in strategies where it is important to quickly adapt to changes and capture profit/loss - whether scalping, arbitrage, or simply tightening a grid of orders. The support for market stop and instant position exit is one of the reasons why Bybit bot trading remains a great solution for beginners and experienced traders alike.

FAQ

1. When do the sessions on the exchange start and what are the sessions?

Cryptocurrencies are traded around the clock, but it is possible to allocate active hours, for example, the intersection of the Asian and American sessions. This is important for assessing volatility and choosing a strategy.

2. What is the difference between a limit order and a market order?

A limit order is executed at a set price, but it is not certain that it will work. A market order is executed instantly at an available price, but may be more expensive due to slippage.

3. How does market trading work in bots?

In a bot, you can specify a condition in which it will close the position itself with a market order. This is especially useful in high volatility and in automated strategies.

4. Where to read more about the value of crypto exchanges?

In our blog article - Why crypto exchanges are needed.

5. How to get started with Veles bot and enable market close?

Simply register on the platform, connect the exchange and enable the desired options in the bot settings. All instructions are on the official Veles website.