Limit Orders

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Whilst trading, you’ll come across several different orders types. One of the most commonly used is the Limit Order.

Limit Orders explained

I’ll break down limit orders into their small components, that way you’ll get a full comprehensive understanding of them delivered as simple as possible.

What is a Limit Order?

A Limit Order is an order to buy or sell an asset (such as a cryptocurrency) at a specific price (or better).

Are Limit Orders guaranteed to execute?

Limit orders are not guaranteed to execute. However, they will execute provided pricing requirements are met, and any limit orders ahead of you have also been filled. Depending on the size of the limit order, you may find the order is partially filled.

Partially filled limit orders

A limit order is partially filled portions of the limit order are executed. The orders are filled by other traders through the exchange. So, if you place a limit order to sell 1000 Bitcoin, and you’re at the front of the queue, it might take multiple traders buying your Bitcoin before your order is completely filled. Though, you can take out a limit order that is partially filled, but once a trade executes it is irreversible.

Can you see Limit Orders in the order book?

Yes, Limit Orders are visible on an exchange’s Order Book, provided your exchange provides level 2 information such as market depth and Order Books.

Limit Order queue

Limit Orders are firstly sorted by price — with better prices getting executed first — then, they ordered on a first-come-first-service basis. So, if you’re looking to jump the queue and execute faster, it’s worthwhile pricing your Limit Order more competitively.

Types of Limit Order

There are two distinct types of Limit Order; Buy Limit Orders and Sell Limit Orders. They’re the same, except one is used to buy while the other sells.

Buy Limit Order

What is a Buy Limit Order?

A Buy Limit Order is an order type used to buy a set amount of an asset at a specific price.

Why use a Buy Limit Order?

Traders use Buy Limit Orders when they’re looking to buy a fixed amount of an asset. They’re also used to ensure that the asset is only bought at a specific price.

Buy Limit Order example

Bill has $100, and he wants to buy 100 Ethereum at $1. So, he places a Buy Limit Order on an exchange like Kucoin and waits for the price of Ethereum to fall to $1 per ETH. (Might take a while.)

Sell Limit Order

What is a Sell Limit Order?

A Sell Limit Order is an order type used to sell an asset at a specific price or better.

Why use a Sell Limit Order?

You would place a Sell Limit Order if you were looking to sell your held cryptocurrency for another that you don’t hold (or want more of).

Sell Limit Order example

Ben wants to sell his 10000000 Dogecoin at $1 per DOGE. So, he goes to a cryptocurrency exchange, like Kucoin, and places a Sell Limit Order for all his DOGE at $1 per DOGE. The price is currently lower, so he’s not a millionaire yet. But if (and when) the price of DOGE skyrockets to $1, Bill’s order will execute!

How to Place a Limit Order

Most exchanges worth their salt will offer Limit Orders to their users.

  1. Find the relevant trading screen for the asset you are looking to place a Limit Order on.
  2. Toggle the order type to Limit.
  3. Input the price you would like your order to execute at
  4. Input the amount you would like to order

How does a Limit Order Work

  • Limit Orders are sent to the exchange.
  • They contain the following information: action (buy or sell), price (to execute at), amount (of cryptocurrency to transact).
  • Limit Orders execute when price requirements are met.
  • Often, Limit Orders will be partially filled as other buyers and sellers fill the order.
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