What is a limit order?

A limit order is an instruction to buy or sell an instrument only at a specific price or better. A buy limit executes at the limit price or lower; a sell limit executes at the limit price or higher.

Do limit orders avoid slippage?

Limit orders control price by setting a maximum buy price or minimum sell price. They can reduce price slippage, but you take on the risk of not being filled (or being partially filled).

Trading Basics

Order Types

Limit Order

Q: Will a limit order always fill?

No. A limit order only fills if the market reaches your price and there is enough liquidity available. If the market never trades at your limit, the order can remain unfilled.

A limit order is an instruction to buy or sell only at a specific price (your limit) or better. It gives you price control: you decide the worst price you are willing to accept.

In plain English: a limit order says, "I'll trade, but only at my price."

Example
Risks and trade-offs
FAQ

How a Limit Order Works

A limit order sits in the market (or with your broker/venue) waiting for price to reach your level. When the market trades at your price, your order can execute.

Buy limit: you set the maximum price you will pay
Sell limit: you set the minimum price you will accept

"Better" means: for buys, cheaper; for sells, higher.

Buy Limit vs Sell Limit

Buy Limit (Enter lower, or take profit on a short)

Placed below the current price (most common use)
Executes at your limit price or lower
Used to "buy on a pullback" instead of chasing price

Sell Limit (Enter higher, or take profit on a long)

Placed above the current price (most common use)
Executes at your limit price or higher
Used to "sell into strength" or exit at a target

On many platforms you'll place a limit order by selecting "Limit" as the order type and entering a price.

When Should You Use a Limit Order?

Limit orders are ideal when price matters more than immediate execution:

Planned entries: enter at a pre-defined level (support/resistance, pullback level)
Take-profit targets: exit automatically at your target price
Illiquid markets: avoid paying wide spreads or poor fills by demanding your price
News/volatility: avoid "panic fills" at bad prices (but you may miss the move)

Example: Limit Order on EUR/USD

EUR/USD is currently trading around 1.1000. You want to buy, but only if price dips.

You place a buy limit at 1.0985
If price falls to 1.0985 and trades there, your order can fill at 1.0985 or better (lower)
If price never reaches 1.0985, the order stays pending (no fill)

This is the key trade-off: price control in exchange for fill uncertainty.

Risks and Trade-offs

No fill: the market may not reach your price
Partial fills: you may be filled for only part of your order size if liquidity is limited
Opportunity cost: price can move away without you
Hidden volatility: during fast markets, price can "touch" your level briefly, fill partially, then move

Important nuance

A limit order controls price, not certainty. If you must be in the trade immediately, a market order may be more appropriate — but you accept the execution price risk.

Common Misconceptions

"Limit orders always avoid slippage."
They reduce price uncertainty, but you can still get partial fills or no fill at all. The "cost" becomes missed execution.
"If price touches my limit, I'm guaranteed a fill."
Not guaranteed. It depends on liquidity at that level and your place in the queue.
"Limit orders are only for take profit."
They're also widely used for entries, especially for pullbacks and mean reversion setups.

✅ Quick Checkpoint

Test yourself. Try answering before expanding the model answers.

1) What does "price or better" mean for a buy limit vs a sell limit?

Buy limit: limit price or lower. Sell limit: limit price or higher.

2) What is the main trade-off of using a limit order?

You gain price control, but you take on fill uncertainty (no fill or partial fill).

3) Name two situations where limit orders are often preferred.

Planned entries at key levels, take-profit targets, illiquid markets, and avoiding poor fills during volatility.

Frequently Asked Questions

Will a limit order always fill?

No. It only fills if the market trades at your price and there is enough liquidity available at that level.

Do limit orders work the same on FX, CFDs, shares and crypto?

The concept is the same, but execution details differ by venue (exchange vs OTC) and broker model. Liquidity, queue priority and partial fills can vary significantly by market.

Are limit orders good for beginners?

Yes, because they promote planning and discipline. The main beginner mistake is placing limits without a clear reason (level, setup, risk plan) or ignoring the possibility of no fill.

How is a limit order different from a stop order?

A limit order executes at a specified price or better. A stop order triggers when price reaches a level and usually becomes a market order, prioritising execution over price control.

Summary

A limit order lets you buy or sell only at a chosen price (or better). It is one of the most important tools for planned trading: it supports disciplined entries and automated take-profit exits.

The trade-off is simple: price control versus certainty of execution.