Limit Order Definition

A limit order lets you tell an exchange to buy or sell an asset only at a price you choose or better. Simply put, you set your price, and the trade waits until the market reaches it.

How a limit order works

When you place a limit order, it stays in the exchange’s order book until the market hits your chosen price. The trade only goes through if someone agrees to that price. If not, your order stays open until you cancel it or it expires. This waiting is what makes limit orders different from orders that fill instantly.

Buy and sell limit orders

A buy limit order only works if the market price drops to your set price or lower. A sell limit order works if the price goes up to your set price or higher. This way, a buy limit helps you get in at a lower price, and a sell limit helps you sell at a higher price.

Why traders use limit orders

Traders use limit orders when they want to control the price they pay or get. These orders help cut down the gap between the price you expect and the price you get, which is useful in fast-moving or quiet markets. Limit orders also let you plan trades ahead of time, so you do not have to watch the market all day.

Risks and downsides

The main downside is that a limit order might never fill if the market does not reach your price. You could miss out if the price moves quickly. Sometimes, only part of your order fills if there is not enough trading at your price, and the rest stays open.

Practical example

If Bitcoin trades at $32,000 and you want to buy it at $24,000, you place a buy limit order at $24,000. If the price later drops to $24,000, the exchange will fill your order at that price or better. If it never reaches $24,000, the order will simply remain until you cancel it.

Where you can place limit orders

Most crypto and regular exchanges let you use limit orders. To place one, choose the limit order option, enter the amount and your price, then submit. Your order will show up in the order book until it is filled or you remove it.

Related order types

A market order fills right away at the best price available, which is the opposite of a limit order. You can also combine limit orders with other types of orders in advanced strategies, like using trading bots or setting up layered orders that respond to market changes.