What Is Limit Order?
Also known as: Limit Buy Order, Limit Sell Order
In short
A limit order is an order to buy or sell an asset only at the price set by the investor or a better one; it waits in the order book until the market price reaches that level.
A buy limit order is executed at the set price or lower, and a sell limit order at the set price or higher. For example, if a coin is trading at $100 and a user places a buy limit order at $95, the order is filled when the price falls to that level and enough sellers are available against it. If the price never reaches that level, the order stays open and waits until the user cancels it or it expires.
Limit orders are preferred because they give price control and prevent unexpected slippage. Because they add liquidity to the order book, many cryptocurrency exchanges charge lower trading fees to those who place limit orders (makers) than to those who place market orders (takers). Advanced order types such as stop-limit are also built on limit order logic.
The downside of a limit order is that there is no guarantee of execution. In fast-moving markets, the price may come very close to the set level and reverse, or the order may be only partially filled. For users who want to trade immediately, a market order may be more suitable; however, in that case price control is given up.
Last updated: · This content is for information purposes only and is not investment advice.