Limit Order A Limit Order is an order placed in the order book at a specific price. The characteristic of this kind of order is that the transaction price is set in advance by the trader and there is no slippage. But unlike market orders, limit orders may not be filled immediately. The transaction will only be executed when the market price reaches the set price of the limit order (or a more cost-effective price appears). Therefore, traders can use limit orders to place orders in advance to buy at a price lower than the current market price or to sell at a price higher than the current market price.

What is the principle of limit order?

The limit order actually acts as a maker, that is, the role of the market maker. After a trader submits a limit order, the order will be immediately placed in the order book. All orders in the order book are limit orders of some type. They will not be filled unless the market price reaches these price limits.

For example, if you want to sell BTC for $30,000 and the current price is $28,000, you would place a $30,000 limit sell order for BTC. This order will automatically execute when the BTC price rises to $30,000 or above. If there are other people’s BTC $30,000 sell orders before you, the system will execute these orders placed in advance first.

Another characteristic of limit orders is that you cannot guarantee that every limit order will be executed. If the market price never reaches the target limit price, your limit order will remain unfilled on the order book. Typically, limit orders are valid for up to a few months (generally 90 days), but this depends on the specific rules of the exchange. After expiration, if the order has not been filled, the order will be cancelled.

When to use limit orders?

• When you have specific price requirements for the target asset and the current market price does not meet your requirements. For example, you want to buy at a price lower than the market price or sell at a price higher than the current market price.
• When you have your own trading strategy and are not eager to trade immediately. This way you can place these buy and sell orders in advance, wait for market changes, and receive your orders.
• When you want to lock in profits or stop losses.

Market order VS limit order

Market orders can only be executed through existing limit orders on the order book. These The price is often the market price or worse than the market price. The advantage is that it is instant and efficient, but not everyone wants to use the prices available in the market when trading or investing, so limit orders are a good option.

A limit order refers to an order to buy or sell a certain amount of the target currency at a price set in advance. Traders can also choose whether the exchange can partially execute this limit order or if it must be fully executed. In the latter case, if the exchange cannot fully execute your order, it will not be executed at all (Fill or Kill, FOK). Traders can use limit orders to plan trades in advance without having to watch the market.