Sell limit

A sell limit is a pending order placed above the current bid price. It fills when the bid rises to your level, at that price or better. It is used in two ways:

• To open a short position after a rally, for example near a resistance level, on the view that the price is more likely to fall from there.
• To take profit on a long position. A take-profit attached to a buy trade is, in effect, a sell limit.

Example

Illustrative figures: GBP/USD is at 1.2700 / 1.2702. You place a sell limit at 1.2750 with a stop-loss at 1.2785 and a take-profit at 1.2650.

• The bid must rise 50 pips to 1.2750 for the order to fill.
• If it fills, your risk is 35 pips and your target is 100 pips.
• If the price peaks at 1.2745 and falls back, the order never fills.

If it fills on one mini lot (about $1 a pip), the stop would cost about $35 and the target would pay about $100, before costs.

Common mistakes

• Mixing it up with a sell stop. A sell stop sits below the market and fills when price falls to it; a sell limit sits above and fills when price rises.
• Assuming the level will hold. A sell limit at resistance is a bet that the level holds. If it breaks, the order fills just before the move continues against you, which is why a stop-loss matters.
• Ignoring weekend gaps. If the market opens well above your level, a sell limit fills at the opening price, which may already be beyond your planned stop.

See buy limit for the mirror image and sell stop for the breakout version. The buy limit vs buy stop guide covers the choice in depth.