A standing order, in lot identification, is an instruction a holder gives a broker or custodian in advance stating how units are to be identified whenever a sale occurs in the account, for example highest cost first. It applies to every later sale until it is changed, and it is not a trading order.
Identifying units sale by sale is impractical for anyone who trades often. A standing order replaces the per-sale instruction with a rule the broker applies automatically: sell the highest-cost tax lot first, or the most recent, or the one that produces a long-term result. The holder sets the rule once, usually in the account's settings, and the broker matches each sale against the account's lots according to it. A per-sale instruction can still be given for a particular sale and overrides the standing order for that sale.
A standing order is an accounting instruction and has nothing to do with market, limit or stop orders. It does not cause a trade; it decides which lots a trade that has already been placed is treated as consuming. It belongs to the account it was set in. An order on one exchange account says nothing about another account or about an unhosted wallet.
A setting in tax software that reorders lots is not a standing order. The software is not the custodian, and the broker has not been instructed.
Under Regulations section 1.1012-1(j), for digital asset units acquired or disposed of on or after January 1, 2025, a taxpayer may make an adequate identification of units held with a broker either by identifying the units to the broker no later than the sale or through a standing order that the broker applies. The standing order is the second of those routes. It has to be in place before the sale it is meant to govern, and the broker has to actually apply it. Where neither a per-sale identification nor a standing order exists, the broker treats the units as sold FIFO within the account.
A standing order can express HIFO, LIFO or any other ordering the broker is able to carry out. It does not make those orderings methods in their own right; it is the mechanism by which specific identification is made in advance. The broker's Form 1099-DA reflects the lots the standing order selected.
For 2025, IRS Notice 2025-7 provided relief that let taxpayers rely on their own records to identify units held with a broker where the broker did not support standing orders or per-sale identification. That relief is for 2025. Standing orders have no role for unhosted wallets, where identification is made in the taxpayer's own books and records no later than the sale.
A holder selects HIFO in their tax software in January 2025 and treats that as a standing order. The exchange was never instructed and applies FIFO to every sale during the year. The Form 1099-DA reports FIFO lots; the return reports HIFO lots; the difference is basis the holder cannot support because no identification was ever made to the broker.
Read our Universal vs Wallet-Based Cost Tracking
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