Limit Order

What Is a Limit Order?

A limit order is a trading instruction to buy or sell an asset at a specified price or better. It empowers traders to carry out transactions at a set price or a more advantageous one if obtainable in the market. This order type provides greater influence over the execution price compared to market orders, which are executed at the prevailing market price.

How Limit Orders Work

When using a limit order, traders indicate the price at which they want to buy or sell an asset. If the market reaches that price, the order is activated, and the trade is carried out at the specified price or a more favorable one. However, there is no assurance that the order will be completed if the market does not reach the specified price.

The Advantages of Limit Orders

- Price control: Limit orders empower traders to manage the price at which they enter or exit a position, aiding them in effectively managing their trading strategies.

- Avoidance of price slippage: By specifying a particular price, traders can steer clear of price slippage, which occurs when the execution price deviates from the expected price due to low liquidity or rapid market movements.

- Patience: Limit orders enable traders to exercise patience and wait for the market to reach their desired price level, rather than impulsively trading at the current market price.