What is Limit Order?
Let's find out Limit Order meaning, definition in crypto, what is Limit Order, and all other detailed facts.
A limit order is a term used to describe the process of buying or selling a security at a specific price. Traders that place limit orders specify their prices in advance. A limit order will also be executed if the offered price is better than the specified limit price.
Traders that place a buy limit order and traders that place a sell limit order differ. When buying, an order will go through when the limit price or a lower price is offered. In the case of selling, an order will go through when the limit price or a higher price is offered.
These order requirements provide traders with an opportunity to have better control over trading prices. Additionally, it can help during periods of high volatility.
When buying, limit orders act as a sort of guarantee that the trader will not go over their budget. This means that they will either pay their limit price or a lower price. However, that doesn’t necessarily mean that the order will be filled.
Limit orders will only be executed if the limit price meets the order qualifications. Therefore, if the asset doesn’t reach the limit price, the order is not considered filled, and the investor won’t be able to trade at all.
Let’s use an example to get a clearer understanding. For instance, a trader is looking to buy a security but is bound by a price limit. The price limit is $5,000, therefore the trader will only buy the security at the limit price of $5,000 or lower.
The same logic can be applied to cryptocurrencies. Let’s say a trader has a price limit of 2 BTC. In the case of buy orders, they can buy an asset only at the price limit of 2 BTC or lower. When it comes to sell orders, they will sell the asset when the price limit of 2 BTC or higher is reached.