Summary

A limit order is an order placed in the order book at a specific limit price. The price limit is determined by you. Trades are only concluded when the market price reaches the limit price (or higher). Therefore, a limit order allows you to buy at a lower price or sell at a higher price than the current market price.

Unlike market orders, which execute the trade immediately at the current market price, limit orders are placed on the order book and are not immediately executed. implement. In most cases, limit orders reduce fees because you are trading as the maker rather than the taker.

Introduction

Do you find it difficult to decide which order type to use when purchasing Bitcoin (BTC) or Ethereum (ETH)? Different order types will affect your trades in different ways, so it's important to understand the differences between them before placing an order. If you want more control over your trading, consider using limit orders to limit the price at which a token can be bought or sold.

What is a limit order?

A limit order is an order with a specific buy or sell price. To place a limit order, you set a maximum or minimum price at which you are willing to buy or sell an asset. Your order is then recorded in the order book and will only be executed when the market price reaches the limit price (or higher).

Unlike market orders, which execute the trade immediately at the current price, limit orders give you greater control over the execution price. Since limit orders are automatically executed, you don't need to monitor market dynamics around the clock, and you don't need to worry about missing out on buying or selling opportunities while you sleep.

However, execution of limit orders is not guaranteed. If the market price is consistently lower than your sell order limit price/consistently higher than your buy order limit price, your transaction will always remain outstanding in the order book. Typically limit orders can last for several months, but this depends on which cryptocurrency trading platform you use.

How do limit orders work?

After a limit order is submitted, it will be recorded in the order book immediately. But it will not execute unless the token price reaches a certain limit price (or higher). For example, you want to sell 10 Binance Coin (BNB) for $600, and the current price is $500. You can place a sell limit order of $600 for Binance Coin (BNB). When the Binance Coin (BNB) price reaches or rises above the target price, your order will be executed based on market liquidity. If there are other Binance Coin (BNB) sell orders before yours, these orders will be executed first. Your limit order will then be executed using remaining liquidity.

Another thing to consider when placing a limit order is the expiration date of the order. Unless you follow the market closely, you may end up buying or selling at a less-than-ideal price due to market volatility. For example, the current market price of Binance Coin (BNB) is $500, and you place a sell limit order for 10 Binance Coin (BNB) at $600. A week later, the price of Binance Coin (BNB) surged to $700. Since the market price has exceeded the limit price you set, your order is filled at $600. In this case, the target price you set a week ago limits the profit you can make. Therefore, it is recommended to review your open limit orders from time to time to keep up with changing market conditions.

Stop and limit orders

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When trading cryptocurrencies, you can use different types of orders, such as limit orders, stop orders, and stop-limit orders. .

A stop loss order is a market price order that is initiated when the market reaches the stop loss price you set. Once the token price reaches the stop price you set, it is an order to buy and sell the token at the market price.

Once triggered, the stop loss order will become a market order and executed at the current market price. If the stop loss price is not reached, your order will not be executed. If the market moves against your position, you can use a sell stop order to minimize potential losses. They can also be used as "take profit" orders to exit a position and protect unrealized profits. A buy stop order can be used to enter the market at a lower price.

The difference between a limit order and a stop-loss order is that the former will be executed at the limit price you set (or more high price), which will execute the order at the current market price (as a market order). But be aware that if the market price changes too quickly, the transaction price of your order may be significantly different from the trigger price.

Stop-limit and limit orders

A stop-limit order combines the functions of a stop-loss order and a limit order. Once the stop price is reached, it will automatically trigger a limit order. Orders are only filled when the market price reaches the limit price (or higher). If you don't have time to monitor your portfolio closely, consider using a stop-limit order to limit the losses you may incur on a trade.

When placing a stop-limit order, you must define two prices: the stop price and the limit price. The difference between a stop-limit order and a limit order is that the former will only place a limit order when the stop price is reached, while the latter will place the order in the order book immediately.

For example, if Binance Coin (BNB) is currently trading at $600, and you place an order with a stop loss of 590 Sell limit stop order. This means that if the price of Binance Coin (BNB) drops to $590, the system will automatically place a sell limit order at the limit price you set (e.g. $585), and your order may be placed at $585 or higher Sell. However, the final execution of your order cannot be guaranteed. If the market price changes too quickly, it is very likely that your order will not be executed.

Stop-limit and stop-loss orders

Stop-limit orders and stop-loss orders will be triggered based on the stop-loss price you set. However, after being triggered, a stop-limit order will create a limit order, while a stop-loss order will create a market order.

When to use limit orders?

You can use limit orders in the following situations:

• You want to buy at a specific price lower than the current market price, or sell at a specific price higher than the current market price;

• You are not in a hurry to buy or sell immediately;

• You want to lock in unrealized profits or minimize potential losses;

• You want to split your order into smaller limit orders to achieve a dollar cost averaging (DCA) effect.

Remember, even if the limit price is reached, your order may not be executed. It entirely depends on market conditions and overall liquidity. In some cases, your limit order may only be partially executed.

How to place a limit order on Binance?

Suppose you want to buy Binance Coin (BNB) at a lower price than the current bid. You can place a buy limit order and specify the maximum price you are willing to pay.

1. Log in to your Binance account and go to [Trading] on the top navigation bar. Select [Classic] or [Advanced] trading page. In this example, we use [Classic].

2. Go to the search bar on the right side of the screen and enter "BNB". Select the trading pair you want to trade Binance Coin (BNB). We will select [BNB/BUSD].

3. Scroll down to the [Spot] box and select [Limit Price]. Then, set the price and the amount you want to buy. You can also set the purchase amount by clicking the percentage buttons, so you can easily set up to place a sell limit order at 25%, 50%, 75% or 100% of your balance. Click [Buy BNB] to confirm.

4. You will see a confirmation window pop up on the right side of the screen, and your limit order will be in the order book issued.

To manage your open orders, scroll down to [Open Orders]. A limit order will only be executed when the market price reaches your limit price. If the market price does not reach the price you set, the limit order will remain outstanding.

Summary

When you want to trade at a better price than the current market price Limit orders are an ideal trading tool when buying or selling a token at a price. You can use it to maximize unrealized gains or limit possible losses. But before choosing an order type, you should understand these different options and evaluate how each one plays into your overall portfolio and trading strategy. If you're interested in learning more about the different order types, check out our Understanding the Different Order Types.