What is a Limit order?
A limit order is an instruction to buy or sell an asset if it reaches a specified price or better. This order type allows traders to control their trading activities better. A limit order can be both a buy and a sell order.
- A buy order is executed when the asset price reaches the limit price or lower.
- A sell order is executed when the asset price reaches the limit price or higher.
For example, a trader wants to buy cryptocurrency but is limited to a specific price, say, $15. So, by placing a limit order, they ensure that the purchase is made at $15 or lower.
And on the contrary, if a trader wants to sell an asset at $15 or higher, a limit order set to this value will be executed when the asset price drops to $15 or lower.
If the preset price is not reached, the order is not executed.