Limit Order
Definition
A limit order is an instruction to buy or sell at a specific price or better. It prioritises price certainty over execution certainty. While limit orders help control entry and exit prices, they may not execute at all if the market does not reach the specified level, making broker order-handling and liquidity access important considerations.
In Plain English
In plain terms, a limit order lets you say: ‘Only trade if I can get this price or better.’ Unlike a market order, which executes immediately, a limit order waits for the market to meet your price. This protects you from worse prices but means there is no guarantee the trade will be filled.
How It Works
- You choose a price at which you are willing to buy or sell.
- You place a limit order with the broker specifying that price.
- The order sits in the market or the broker’s system awaiting execution.
- If the market reaches your price, the order becomes eligible to execute.
- Execution occurs at your limit price or better, depending on available liquidity.
- If the market does not reach your price, the order remains unfilled.
- Limit orders can be partially filled if liquidity is limited.
- Unfilled limit orders can expire or be cancelled based on the order’s time conditions.
Why This Matters for Traders
Limit orders give traders control over price, which is especially useful in volatile markets or when trading less liquid instruments. They help manage entry costs and reduce the risk of slippage. However, relying solely on limit orders can result in missed trades, particularly during fast-moving markets where prices may skip over the limit level.
Common Misunderstandings
- Limit orders always execute if the price touches the level: execution depends on available liquidity.
- Limit orders eliminate all execution risk: partial fills and missed trades can still occur.
- Limit orders are always better than market orders: each serves a different purpose.
- The displayed price guarantees a fill: other orders may be ahead in the queue.
- All brokers treat limit orders identically: order handling and priority rules differ.
How This Affects Broker Choice
Broker handling of limit orders can materially affect outcomes. When comparing brokers, users should consider:
• Whether limit orders are sent directly to the market or handled internally.
• How partial fills are managed and reported.
• Transparency around order priority and execution reporting.
• Platform reliability for placing and modifying limit orders.
• Liquidity access for the instruments traded.
From a comparison and monetisation perspective, limit-order behaviour highlights execution fairness and platform robustness, making it a natural bridge to broker reviews and execution-quality comparisons.
Risks & Common Mistakes
• Missing trades because the market moves quickly past the limit price.
• Placing limits too aggressively without accounting for spread and volatility.
• Assuming full execution on large orders in thin markets.
• Ignoring time-in-force settings that cause orders to expire unexpectedly.
• Choosing brokers with opaque order-priority or internalisation practices.
Risk note: while limit orders reduce price risk, they increase the risk of non-execution, which can be costly in fast-moving or event-driven markets.
Real-World Example
A share CFD is trading at £100. You place a limit order to buy at £98.
• If the price falls to £98 and sufficient liquidity is available, the order executes.
• If the price drops to £98 briefly but liquidity is thin, the order may only partially fill or not fill at all.
If the price then rebounds quickly, you may miss the trade entirely. This outcome reflects execution conditions, not an error in the order itself.
What to Check Before Trading
- Does the broker clearly explain how limit orders are executed and prioritised?
- Are partial fills possible, and how are they shown in trade history?
- How does liquidity vary by instrument and trading session?
- Can you control time-in-force settings (e.g. GTC, day orders)?
- Are limit orders affected by spread widening?
- Is execution behaviour consistent across platforms (web, mobile, desktop)?
- Is the broker regulated under execution standards requiring fair order handling?
Related Concepts
Market orders prioritise execution certainty, while limit orders prioritise price certainty.
Execution rules determine whether and how limit orders are filled.
Liquidity availability affects whether limit orders can be fully executed.
Spread influences where limit prices need to be set relative to quoted prices.
Time-in-force settings control how long a limit order remains active.
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Risk Warning: This website does not provide financial, investment, or trading advice. All information is for educational purposes only. Trading and investing involve substantial risk of loss. You should carefully consider your financial situation and consult with qualified professionals before making any financial decisions.