Limit order

A limit order sets the worst price you are willing to accept. It is a type of pending order: it waits until the market reaches your level.

The two kinds

• Buy limit: placed below the current market price. You want to buy, but only if the price drops to your level or lower.
• Sell limit: placed above the current price. You want to sell, but only if the price rises to your level or higher.

A take-profit is a limit order attached to an open position.

Worked example

GBP/USD trades at 1.2750. You want to buy only on a pullback to 1.2700, where you see support. You place a buy limit at 1.2700.

• If the ask falls to 1.2700, the order fills at 1.2700 (or occasionally better).
• If price only falls to 1.2705 and then rallies to 1.2900, your order never fills and you miss the move.

Limit versus stop orders

A stop order triggers when price moves through a level in the direction of the trade (buy stop above the market, sell stop below), then fills at the next available price, which may involve slippage. A limit order fills only at its price or better, so it protects the price but not the fill.

Practical notes

• Remember buy orders fill at the ask, sell orders at the bid; on a bid-based chart a buy limit may not appear to have been reached.
• Limit orders can sit for days; check whether yours expire at the end of the day or remain until cancelled.

See order types.