A **Limit Order** allows traders to set a **maximum purchase price (for buys)** or **minimum selling price (for sells)**. Unlike market orders, limit orders provide **price control** but do **not guarantee execution**.
**How It Works**
* A **buy limit order** executes **only at the limit price or lower**.
* A **sell limit order** executes **only at the limit price or higher**.
* If the market price does not reach the limit price, the order remains **open until filled, modified, or canceled**.
**When to Use a Limit Order**
* **Price Control** – Ensures execution at a **desired price or better**.
* **Avoiding Slippage** – Protects against **unfavorable price movements**, especially in volatile markets.
* **Passive Execution** – Helps **reduce trading fees** by avoiding taker fees.
* **Retail-Sized Orders** – Works well for **smaller trades** that do not significantly impact market liquidity.
**Considerations**
* **No Execution Guarantee** – If the market **never reaches the limit price**, the order may remain unfilled.
* **Partial Fills Possible** – Orders may be **partially executed** if there is **insufficient liquidity** at the limit price.
* **Not Ideal for Large Trades** – Large limit orders may become **visible in the order book**, potentially influencing market behavior.
This order type is best for traders who **prioritize price control over immediate execution** and are willing to wait for optimal conditions.
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