A limit order is an order instruction to buy or sell an asset at a specified or better price.
Typically, each pair in exchange has its own order book. An order book contains the limited orders that other users have placed in the book.
When a limit order is placed, it will remain in the order book until it is matched with another order. Using limit orders, a trader can specify the price they would like to buy or sell the asset at. Please note that there is no guarantee that other traders will match you at your price.
Why are Limit Orders advantageous?
Limit orders are advantageous as they give users more control over the buying and selling prices of their trades. When placing an order to buy an asset, a maximum acceptable purchase price must be selected. When selling an asset, a minimum acceptable sale price must be selected.
Here is an example of the BTC/EUR limit order form.
A limit order when buying an asset ensures the user that the buy price will not exceed any higher than the amount selected, or lower for a sell limit order. The order will always fill at a specified or better price.
Coinmetro’s Demo Platform is always available if you would like to practice without risk. Please note that this article is not to be seen as trading or financial advice. It is for educational purposes only.