A limit order is a type of order to purchase or sell a cryptocurrency at a specified price or better.
In cryptocurrency trading, a limit order is a popular order type that allows investors to specify a particular price at which they want to buy or sell a digital asset. When placing a limit order to buy, the investor sets the maximum price they are willing to pay. When placing a limit order to sell, the investor sets the minimum price at which they are willing to sell their asset.
Once a limit order is placed, it remains on the exchange until the specified price condition is met or the order is canceled by the trader. If the market price reaches the limit price set by the investor, the exchange automatically executes the trade, buying or selling the asset at the specified price or a better one.
Limit orders offer traders more control over their transactions, allowing them to avoid impulsive decisions and potentially get better prices compared to market orders.
Example 1: Alice wants to buy 5 BTC but only if the price drops to $35,000 or lower. She places a limit order with a buy limit of $35,000. If the market price reaches or goes below this level, Alice's order will be executed, and she will purchase the 5 BTC at the specified price.
Example 2: Bob owns 10 ETH and wants to sell them when the price reaches $3,000 or higher. He sets a limit order with a sell limit of $3,000. If the market price rises to $3,000 or beyond, the exchange will automatically execute Bob's order, and he will sell his 10 ETH at the desired price.