Definition of limit order
A limit order is a basic command type whether you enter an order to buy or sell a futures contract at a specified price or better. Although limit orders do not guarantee a fill, they allow the trader to specify a price to avoid negative slippage. your
Unlike market orders where a trader simply chooses to buy or sell at the best available price, limit orders require a limit price .
Buy limit order vs sell limit order
A buy limit order can only be executed at or below the limit price, while a sell limit order can only be executed at or above the limit price. Limit orders will only be executed if the market reaches the specified limit price Yes if there is enough volume at that particular price level.
Advantages of limit orders
Using a limit order, you can name your price. Also known as commands at rest limit orders “stay” in the order book by anticipating the price that will reach them.
As a result, you are assured that the order will not be bought or sold at a lower price than specified. In fact, sometimes limited orders are executed at an even better price, which is a nice surprise.
Disadvantage of limit orders
Although a limit order gives you control of the price at which your order will potentially be executed, it does not guarantee execution. The limit order will only be executed if the price reaches the specified price and there is sufficient supply or demand on the other side of the market.
In this sense, opportunities to enter or exit the market could be lost with limit orders.
Examples of limit orders
From the E-mini S&P 500 futures chart above, the market is currently trading at 2787. 25 , the limit order to buy 1 contract at 2736 . 50 would force the market down to 2736 . 50 or less (better) to run.
In contrast, the limit order to sell 1 contract at 2821 . 25 would force the market to move to 2821 . 25 or higher (better) to run.
Learn more about basic order types in this quick video overview:
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