Navigating the world of cryptocurrency trading requires a solid understanding of order types, pricing mechanics, and platform-specific features. Whether you're new to digital assets or expanding your trading strategy, knowing how to effectively buy and sell crypto can significantly impact your success. This guide breaks down essential concepts—from market and limit orders to stop orders and position limits—so you can trade with confidence.
Understanding Market Orders
Market orders are the most straightforward way to execute a trade at the current market price. When you place a market buy or sell order, it’s filled immediately based on available liquidity. However, due to the volatile nature of crypto markets, platforms often implement protective measures.
To prevent dramatic price slippage, market orders are adjusted into limit orders with buffers:
- Buy orders are buffered up to 1% higher than the displayed price.
- Sell orders are buffered up to 5% lower than the current price.
This means your order won’t execute if the price moves beyond these thresholds. Unfilled market orders may be canceled after two minutes. This safeguard helps protect traders during periods of high volatility.
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How Limit Orders Work
A limit order allows you to set a specific price at which you’re willing to buy or sell crypto. It gives you greater control over execution but does not guarantee fulfillment.
Limit Orders in USD
- Buy: You’ll never pay more than your specified amount (rounded up to the nearest cent).
- Sell: You’ll receive at least your entered amount (rounded down to the nearest cent).
Limit Orders in Fractional Amounts
- Buy: You receive the exact crypto amount; the USD cost is capped at your limit.
- Sell: You sell the precise amount of crypto, ensuring a minimum USD return.
Keep in mind: A buy limit order executes only when the ask price meets or drops below your limit. A sell limit order triggers when the bid price reaches or exceeds your set value.
Understanding these dynamics is crucial for managing entry and exit points efficiently.
Using Stop Orders to Manage Risk
A stop order becomes a market order once the crypto reaches a predefined stop price. It's commonly used to limit losses or lock in profits.
When triggered:
- The stop order converts into a market order.
- Buy stop orders include a 1% buffer.
- Sell stop orders have a 5% buffer.
Buy Stop Order Example
If XYZ crypto trades at $6 and you set a stop price at $8, the system will trigger a market buy when the price hits $8. This is ideal for catching upward momentum.
Sell Stop Order Example
Suppose you bought XYZ at $10 and it’s now worth $20. To protect gains, you set a stop price at $16.50. If the price drops to that level, a market sell order activates, helping you secure a profit.
Maximizing Control with Stop Limit Orders
A stop limit order combines the functionality of stop and limit orders. Once the stop price is reached, a limit order is placed at your specified price.
Buy Stop Limit Order
Set a stop price above the current market value. When hit, it triggers a limit buy at or below your defined maximum price.
Example: XYZ at $5. Set stop at $8, limit at $8.05. If price rises to $8+, you buy only if available at $8.05 or less.
Sell Stop Limit Order
Set a stop below the current price. When triggered, it places a limit sell order—at or above your minimum acceptable price.
Example: XYZ at $10. Stop at $8, limit at $7.95. If price falls to $8, you sell only if someone pays $7.95 or more per coin.
⚠️ Note: Short-term fluctuations may prevent execution if liquidity doesn’t match your limit price.
Trading in Fractional Amounts and Minimum Sizes
You don’t need to buy whole coins—Robinhood supports fractional trading. You can invest as little as:
- $0.01 via market maker routing
- $0.03 via smart exchange routing
This flexibility makes crypto accessible regardless of budget. However, extremely small holdings (known as "crypto dust") may fall below tradeable thresholds and remain untradeable.
Position Limits for Major Cryptocurrencies
To manage risk and compliance, Robinhood enforces position limits—the maximum cost basis you can hold per cryptocurrency:
- Bitcoin (BTC), Ethereum (ETH), Dogecoin (DOGE), PEPE, SHIB, XRP: Up to $50 million
- All other cryptos: Up to $20 million
Note: While market fluctuations may cause your portfolio value to exceed these limits, new purchases are restricted once the cost basis cap is reached.
Monitoring Prices: Buy vs. Sell Estimates
When viewing a crypto’s detail page, you’ll see both estimated buy and sell prices. The difference between them is called the spread, which reflects market liquidity.
- Narrow spreads (e.g., Bitcoin) = High liquidity, easier trades
- Wider spreads = Lower liquidity, potentially higher transaction costs
Highly traded assets generally offer better pricing efficiency.
24/7 Trading Availability
Unlike traditional markets, crypto trading on Robinhood is available 24 hours a day, 7 days a week, subject to occasional scheduled maintenance. This allows you to react to global events and price movements in real time.
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Pattern Day Trading Rules Don’t Apply to Crypto
Cryptocurrency is not regulated by FINRA or SEC, so pattern day trading (PDT) rules do not apply to crypto trades. However:
- Crypto transactions may affect your margin account balance.
- Your Robinhood Financial account (stocks/options) and Robinhood Crypto account operate separately.
- Restrictions on one account may impact the other.
Also, crypto assets are non-marginable and cannot be used as collateral for stock positions.
Instant Access to Proceeds
After selling crypto:
- Funds are immediately available to buy stocks, options, or other cryptocurrencies.
- Withdrawals to your bank account follow the standard ACH settlement period (up to 5 business days).
Check pending deposits under Account → Transfers → Pending Deposits.
Crypto Buying Power and Fund Availability
- Proceeds from stock/ETF/options sales take 3 business days to become usable for crypto purchases.
- Cash deposits (with Instant eligibility) and crypto sale proceeds are available immediately for reinvestment.
Cost Basis Calculation Method
Robinhood uses the First-In, First-Out (FIFO) method for tax reporting:
- The earliest purchased coins are considered sold first.
- For external transfers: Cost basis defaults to $0, and acquisition date is set as the transfer date into Robinhood.
Always verify this data with your personal records for accurate tax filing.
Order Routing Practices
Robinhood routes crypto orders through various liquidity providers using smart routing algorithms to optimize execution quality. While users don’t control routing destinations, transparency ensures fair pricing across venues.
Frequently Asked Questions
Q: Can I trade crypto on weekends?
A: Yes! Crypto markets operate 24/7 on Robinhood, allowing trades any day of the week.
Q: Why didn’t my limit order execute?
A: Limit orders only fill if market prices meet your specified conditions. If the price doesn’t reach your limit, the order remains open until canceled or expired.
Q: What happens if my stop price is hit but the market gaps past my limit?
A: In fast-moving markets, this can result in unfilled stop-limit orders. Consider using stop-market orders for guaranteed execution (with potential slippage).
Q: Are my crypto assets protected like stocks?
A: No. Crypto holdings aren’t covered by SIPC or FDIC insurance. Always assess custody risks before investing.
Q: Can I use crypto as collateral for stock trades?
A: No. Crypto is non-marginable on Robinhood and cannot be used as collateral for equities positions.
Q: How do I add a cryptocurrency to my watchlist?
A: Search for the asset, go to its detail page, then tap “Add” or “+ Add to lists” to include it in your watchlist.
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