Limit Order
What Is a Limit Order?
A limit order is a type of trading instruction that tells your broker to buy or sell an asset only at a specific price or better. It gives you more control compared to a market order, because you decide the exact price where the trade should happen.
For example, imagine you want to buy EURUSD when the price drops to 1.10201. Instead of watching the screen all the time, you place a buy limit order at that price. If the market goes down to 1.10201 or lower, the buy limit order is triggered and you enter the trade.
Buy Limit Order and Sell Limit Order
- A buy limit order (or simply “buy limit”) means you want to buy at a price lower than the current market price.
- A sell limit order (also called “limit sell order” or just “sell limit”) means you want to sell at a price higher than the current market price.
This way, you can buy when price reaches low or sell only when it climbs high, which helps you anticipate market moves instead of reacting to them.
Limit Price Meaning
The limit price is the exact price you set for your order. It tells the broker, “Only buy or sell at this price or better.”
Market Order vs Limit Order
- A market order buys or sells immediately at the current available price.
- A limit order waits until the market reaches your chosen price before executing.
So when comparing market vs limit order, market orders are faster but less controlled, while limit orders give you control but may not always get filled.
What Is a Stop Limit Order?
A stop limit order combines two things: a stop price and a limit price.
- Once the stop price is reached, the order becomes a limit order.
- The trade will then only execute at the limit price or better.
This tool helps traders control both when an order is activated and the exact price range where it can be filled. For example, If the current price of EURUSD is 1.10501, a market order buys instantly at 1.10501, while a limit order at 1.10401 only triggers or executes if the price drops to that level.
Why Use Limit Orders?
- They give you control over your entry and exit prices.
- They help avoid surprises from sudden market movements.
- They are useful for planning trades in advance, such as setting buy and sell levels for any assets.
Other Glossary Terms
L
- Leverage
Leverage allows traders to control larger market positions with less capital by borrowing funds from their broker, amplifying both potential gains and losses in proportion to the leverage used.
- Liquidity
Liquidity in trading means how quickly and easily an asset can be bought or sold without major price changes, reflecting market activity and the ease of entering or exiting positions.
- Long Position
A long position means buying an asset with the expectation that its price will rise, allowing the trader to sell later at a higher price and make a profit.
- Lot Size
A lot size represents the total units of a currency you control in a trade, determining how big or small your position is, such as standard, mini, micro, or nano.
- London Session
The London Session is the most active forex trading period, overlapping major markets, when liquidity, volatility, and trading opportunities reach their peak as global traders engage in heavy market activity.
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