Limit Order
A limit order sets the maximum buy price or minimum sell price. It provides price control but may not fill if the market does not reach your price.
Definition
A limit order is an order to buy or sell at a specified price or better.
How it works
• A limit buy sets the highest price you are willing to pay and typically rests on the bid side.
• A limit sell sets the lowest price you are willing to accept and typically rests on the ask side.
Why it matters
Limit orders give price control and can reduce slippage. If you place a limit order inside the spread and get filled, you can achieve price improvement and a lower effective spread.
Common pitfalls
No fill risk: If the market does not trade to your limit price, you may not get filled.
Partial fills: In thin markets, you may only fill part of your size at your limit price.