Tools that enable traders to automatically buy or sell cryptocurrencies on a trading platform when a certain price target is reached.
Whereas market orders see traders sell their cryptocurrency at the current price, limit orders give traders a degree of control over when a transaction is executed.
A buy limit order gives investors the opportunity to gain exposure to a digital asset when prices fall to a certain level. However, there are no guarantees that an order will be filled.
This strategy can also have its risks. For example, if a trader has a buy limit set at $3,200, and Bitcoin falls to $3,205, they would miss the opportunity to enter the market.
As you would expect, sell limits enable traders to offload cryptocurrencies when the market price rises to a level they have pre-determined.
Limit orders shouldn’t be confused with stop orders, which are used to minimize losses and exit a particular position before prices deteriorate further.
One of the biggest advantages associated with buy orders is that they prevent traders from paying a higher price than they expected to — and this can be something of a blessing in the fast-moving, volatile cryptocurrency markets.
They can also help to remove some of the emotion out of trading. Professionals can outline their desired strategy and price targets in advance, and know that they will automatically be fulfilled. This can prevent last-minute decisions that may cause traders to get greedy or chase losses.