What is Limit Order


A limit order is an order that you place on the order book with a specific limit price. You determine the price. But unlike the market order, the limit order may not be filled instantly. The trade will only be executed if the market price reaches your limit price (or better). Therefore, you may use limit orders to buy at a lower price or to sell at a higher price than the current market price.

Source: Binance

How does a limit order work?

Limit order acts as the maker. When a limit order is submitted, it will be placed on the order book immediately. All orders in the order book are limit orders. They won't be filled unless the price reaches the limit price. 

For example, if you want to sell a BTC at $30,000, and the current price is $28,000, you can place a BTC sell limit order of $30,000. When BTC price rises to $30,000 or above, your order will be automatically executed. If other BTC $30,000 sell orders are placed ahead of yours, the system will execute those orders first. 

However, there is no guarantee that your limit order will be executed. If the market price never reaches the limit price, your order will remain unfilled on the order book. Typically, a limit order can be placed for up to a few months (90 days in general), but it depends on the crypto exchange you are using. Your order will expire after a certain period.

When to use a limit order?

  • You have specific price requirements for the target asset, and the current market price does not match your requirements. For example, you want to buy below or sell above the current market price.
  • You want to plan your trading strategy and are not in a hurry to trade immediately. Limit Orders allows you to plan your buy-and-sell points.
  • You want to lock in your realized profits or stop your losses.

Market Order VS Limit Order

Limit orders are orders to buy or sell a quantity of a financial asset at a set price or better. You can also choose whether the exchange can partially fill your limit order or it must be totally filled. In the latter case, if the exchange can't completely fill your order, it won't execute it at all (Fill or Kill orders).

Market orders can only be filled with existing limit orders. Not everyone wants to take the price available on the market when trading or investing, so a limit order is a good alternative. You can use limit orders to plan your trades in advance without always being present and waiting for the right price.


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