A limit order is a type of trading instruction that directs a broker to buy or sell an asset at a specified price or better. Unlike market orders, which execute immediately at the best available price, limit orders are placed on the order book and only executed when the market price reaches the trader's specified price.
"If you want to sell 10 BCH at $2,000 USD each, you can place a limit sell order. This order will remain on the books until a buyer is willing to purchase at your set price. The duration of these orders can range from minutes to months, or even years, until they are either fulfilled or canceled."
Limit orders offer traders more control over the execution price. They can be useful in volatile markets where prices can change rapidly, allowing traders to set the price at which they are willing to buy or sell an asset.
"In a volatile market, a limit order can prevent you from buying an asset at a higher price or selling at a lower price than you're comfortable with."
The main disadvantage of limit orders is that there's no guarantee they will be executed, as they depend on market conditions. If the asset's price doesn't reach the limit price, the order will not be filled.
"If you set a limit order to sell Bitcoin at $50,000, but the price doesn't reach that level, your order will remain unfilled."
* All terms and definitions may update as the Cryptionary improves.
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