A trading instruction to buy or sell an asset at a specified price or better.
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. Limit orders give traders precise control over their entry and exit prices.
"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."
"When placing a limit buy order for Bitcoin Cash at $250, the order will only execute if the market price falls to $250 or below, ensuring you never pay more than your specified price."
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. They also enable strategies like buying during dips or selling at resistance levels without requiring constant market monitoring.
"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."
"During periods of high volatility in the BCH market, traders can set limit orders at key support levels to automatically purchase coins if prices drop temporarily, capitalizing on short-term price movements without having to watch the market constantly."
"Limit orders allow traders to execute their trading plans with discipline, removing emotional decision-making during rapid market movements."
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. Additionally, partial fills may occur when there isn't enough liquidity at the specified price to complete the entire order.
"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."
"A trader placing a large limit order to buy BCH at a specific price might only get a partial fill if there aren't enough sellers at that price, leaving part of their intended position unexecuted."
"During fast-moving markets, limit orders may result in missed opportunities if the price moves quickly through your limit price and continues in a favorable direction without your order being fully executed."
There are several variations of limit orders that provide additional functionality, including Good-Till-Canceled (GTC), Fill-Or-Kill (FOK), Immediate-Or-Cancel (IOC), and Post-Only orders. Each variation offers different execution conditions to suit various trading strategies.
"A Good-Till-Canceled limit order remains active until it is either filled or manually canceled by the trader, which could be days, weeks, or even months."
"Fill-Or-Kill limit orders must be filled completely at the specified price immediately, or they are automatically canceled, making them useful for traders who want to avoid partial fills."
"Post-Only limit orders ensure that the order will only be placed on the order book and not match with an existing order, which helps market makers avoid paying taker fees."
Limit orders are essential tools for various trading strategies, including dollar-cost averaging, range trading, and automated trading systems. They allow traders to implement precise entry and exit points according to their technical analysis or investment strategy.
"A trader following a dollar-cost averaging strategy might set recurring limit buy orders for BCH at prices 5% below the current market price, aiming to accumulate at favorable price points over time."
"Range traders often place limit buy orders at support levels and limit sell orders at resistance levels, automatically executing trades when prices reach these predetermined boundaries."
"Trading bots typically use limit orders rather than market orders to execute strategies, as they provide better price control and often lower fees on most cryptocurrency exchanges."
All terms and definitions may update as the Cryptionary improves.