Limit Order
Definition
An order to buy or sell a security at a specified price or better. A buy limit order executes at the limit price or lower; a sell limit order executes at the limit price or higher.
A limit order gives you control over the price at which your trade executes. When you place a buy limit order at $50, you're saying "buy this stock, but only if the price is $50 or less." The order sits on the order book until the market price reaches your limit or you cancel it.
Limit orders protect against unfavorable execution prices, especially in volatile or illiquid markets. If a stock is trading at $50 and you place a market order, sudden price movement could cause you to buy at $51 or $52. A limit order at $50 guarantees you won't pay more than $50.
The tradeoff is that limit orders may not execute at all. If you set a buy limit at $48 for a stock trading at $50, and the stock never drops to $48, your order goes unfilled. You miss the trade entirely, which can be costly if the stock continues rising.
Limit orders can be set with different time durations: day orders expire at market close, GTC (Good-Til-Canceled) orders remain active for weeks or months, and IOC (Immediate-Or-Cancel) orders execute whatever is available at the limit price immediately and cancel the rest.
For crypto trading, limit orders are essential due to 24/7 market operation and higher volatility. Placing limit orders at your target prices lets you execute trades while sleeping, and prevents slippage on large orders that could move the market price on smaller exchanges.
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Frequently Asked Questions
When should I use a limit order instead of a market order?
Use limit orders when price precision matters more than guaranteed execution — for volatile stocks, illiquid securities, large orders, or crypto trades. Use market orders when you need guaranteed execution quickly and the bid-ask spread is tight.
Can a limit order fill at a better price than the limit?
Yes. A buy limit at $50 can fill at $49 or $48 if the market moves in your favor. The limit is the worst price you'll accept, not the exact execution price. This is called price improvement.