A limit order is an order that you specify the price of buying or selling an asset. Unlike that of market orders, which are instantaneous at the current price, limit orders enable you to maintain greater control but do not guarantee execution. Limit orders are placed in the order book and will only be executed if the price in the market reaches your specified limit price (or better).

Limit Orders Mechanism

Once you set a limit order, it is put into the order book. The order can only be completed if the market price hits your target price. For instance, if you wish to liquidate 10 BNB at $600 while the present price is $500, you can lodge a sell limit order at $600. If then BNB price touches $600. or more, the order will be carried out, the liquidity of the market allowing it. Other sell orders that have been submitted ahead of yours will get the preference given they were there first. As a rule of thumb, checking open limit orders regularly is beneficial to be in line with the efficient market.

Limit Orders vs. Other Types of Orders

Stop-Loss Order:
A stop-loss order is a market order when the market hits your stop price. It's executed at the present market price after triggering.

Stop-Limit Order:
Merges a stop order with a limit order. It launches a limit order once the stop price is reached, carrying it out only if the market price matches the limit price (or better).

When Do You Use a Limit Order

• When you are looking to buy under the current market price or sell above it.

• When you do not have to be in a rush to buy or sell something right away.

• To make sure to realize gains or to lose a little of the capital.

• To distribute orders in smaller parts for the purpose of dollar-cost averaging (DCA).

Main Concepts

Limit orders give you a handle on the price at which you can make crypto buy/sell. These are beneficial as target price statements are made and risk management is done, but execution remains a matter of uncertainty. Comprehending the sophistications of limit orders and their demarcation with other order types like stop-loss and stop-limit is pivotal in trading efficiently.