Limit

Execution with Limit

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.