What it means
Limit orders rest in the order book until price reaches them. They are maker orders and often pay lower fees.
Example
Price is 100 and you want to buy only at 98: place a buy limit at 98.
In practice
Use a limit order when the price matters more than getting filled: buying a pullback into a level, selling into a target, or entering without paying the spread. Take-profit orders are limit orders.
Because the order rests in the book, you can place it ahead of time and let price come to you, which removes the urge to chase. It also adds liquidity, which is why exchanges often charge makers less.
What to watch for
Price can touch your level and reverse without filling you, especially if many orders were queued ahead of yours. In a strong move a limit entry simply gets left behind, and the entries that do fill include every trade that keeps going against you.
Related terms
3 terms- Market orderAn order to fill immediately at the best available price: it guarantees the fill, not the price.
- Maker and takerMakers add liquidity with resting limit orders; takers remove it with market orders and often pay higher fees.
- Stop orderAn order that becomes a market order once price reaches your stop price.