Glossary

Limit Order

Moderate

A limit order is a type of order to purchase or sell a security at a specified price or a better one. 

What Is a Limit Order?

A limit order is a type of order to purchase or sell a security at a specified price or a better one. 

When it comes to buy limit orders, the order will be executed at a point where the limit price or a lower one occurs, while for the sell limit orders, the order will only be executed when the limit price is achieved or a higher one. This stipulation allows traders to control the prices they trade at better.

Through using a limit order, an investor can essentially guarantee to pay that price or less, while the price is guaranteed. The filing of the order is not guaranteed, however, and limit orders will not be executed unless the security price meets the order qualifications. If the asset doesn't reach the specified price, the order is not filled and the investor might miss out on the trading opportunity.

Limit order uses a pre-specified price to buy or sell a security.

If a trader is looking to buy a stock but has a specified limit, let's say $10,000, they will only buy the stock at a price of $10,000 or lower. You can say this in terms of cryptocurrencies as well, when the trader has 5 ETH, and can only buy another asset at 5 ETH or lower. When the trader is looking to share the shares with the limit, the trader will not sell any shares until the price is at that $10,000 limit or higher (or 5 ETH or higher in another case). 

When using a buy limit order, the investor is actually guaranteed to pay the buy limit order price or better, but what isn’t guaranteed is that the order will be filled. A limit order gives the trader more control over the execution price, and this is specifically the case if they are fearful of using a market order throughout periods of a higher level of volatility.