Sirwin
Sirwin

Trading 101 - Order Types: Limit Orders

By TradingBull | TradingBull_articles | 15 Jan 2021


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In trading, a limit order is an order to buy or sell an asset at a specified (or better) price.

Buy-limit: Buy Order will be executed only at the chosen limit price or lower.

Sell-limit: Sell Order will be executed only at the chosen limit price or higher.

Pros: Buy/sell at chosen price or better.

Cons: Can take time to fulfill or even never be, due to market conditions.

Example:

The current price ABC/USD is $9,540.1

You want to buy ABC and believe its price will go down in a near future. You place a buy-limit order at $9,003.4 for 5 ABC. Your order appears now in your open order book (pending, will execute when the price condition of $9,000 is reached).

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Three hours later, ABC price quickly falls down below $9,003.4 and your order execute at $9,002.9 per ABC on average.

Using a limit order results into paying maker fees to the broker/exchange (as it is not matched immediately).

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TradingBull
TradingBull

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