Résumé

A Limit order is an order that you place in the order book with a specific price limit. You determine the limit. The order will be executed only if the market price reaches (or exceeds) the limit. Therefore, you can use Limit orders to buy at a lower price or sell at a higher price than the current market price.

Unlike Market orders, where trades are executed instantly at the current market price, Limit orders are placed in the order book and are not executed immediately. In most cases, Limit orders incur lower fees because you are trading as a maker rather than a taker.

Introduction

Are you having trouble deciding which order type to use when buying Bitcoin (BTC) or Ether (ETH)? Different order types can affect your trades in different ways, so it’s crucial to understand the distinctions between them before placing an order. If you’re looking for more control over your trades, you may want to consider using Limit orders to limit the price at which you can buy or sell a coin.

What is a Limit order?

A Limit order is a type of trading order that has a specific buy or sell price. To place a limit order, you must set a maximum or minimum price that you are willing to accept to buy or sell an asset. Your order will then be placed in the order book and will only be executed if the market price reaches the limit price (or better).

Unlike Market orders, where trades are executed instantly at the current price, a Limit order gives you more control over the execution price. Because Limit orders are automated, you don’t have to monitor the market 24/7 or worry about missing a buy or sell opportunity while you sleep.

However, there is no guarantee that your Limit order will be executed. If the market price never reaches the limit price, your trade will not be filled in the order book. Typically, a Limit order can be placed for a period of up to a few months, but this depends on the cryptocurrency exchange you are using.

How does a Limit order work?

When a Limit order is submitted, it is immediately placed in the order book. But it will only be executed if the price of the coin reaches the specified limit price (or better). For example, you want to sell 10 BNB at $600, and the current price is $500. You can place a limit order to sell BNB for $600. When the price of BNB reaches the target price or higher, your order will be executed based on market liquidity. If other orders to sell BNB are placed before yours, the system will execute those orders first. Your Limit order will be processed later with the remaining liquidity.

Another thing to consider when placing a limit order is the order’s expiration date. Typically, limit orders can last up to 90 days. If you don’t monitor the market closely, you may end up buying or selling at a less attractive price due to market volatility. For example, the current sell price of BNB is $500, and you placed a limit order to sell 10 BNB at $600. After a week, the price of BNB rose to $700. Since the market price exceeded the limit price you set, your order was filled at $600. In this case, your profits were limited by the target price you placed a week ago. Therefore, it is recommended to review your open limit orders from time to time to stay up to date with the ever-changing market conditions.

Stop-loss orders and Limit orders

There are different types of orders you can use when trading cryptocurrencies, such as Limit, Stop-loss, and Stop-limit orders.

A stop order is a market order that is triggered when the market reaches your stop price. It is an order to buy or sell a currency at the market price when the currency's price reaches the stop price you set.

When triggered, a Stop-loss order becomes a Market order and executes at the current market price. If the stop price is not met, your order will not be executed. Sell stop orders can be used to minimize potential losses in case the market moves against your position. They can also be used as a “Take Profit” order to exit a position and protect unrealized gains. Buy stop orders can also be used to enter the market at a lower price.

The difference between a Limit order and a Stop-loss order is that the former will be executed at the limit price you set (or better), while the latter will be executed (as a Market order) at the current market price. But keep in mind that if the market price changes too quickly, your order may be executed at a price that differs significantly from the trigger price.

Stop-limit orders and Limit orders

A Stop-limit order combines the features of a Stop and a Limit order. Once the stop price is reached, it will automatically trigger a Limit order. The order will be executed only if the market price reaches the limit (or exceeds it). If you don't have time to closely monitor your portfolio, you may want to consider using Stop-limit orders to limit the losses you can incur in a trade.

When placing a Stop-loss order, you must set two prices: the Stop price and the Limit price. The difference between Stop-limit and Limit orders is that the former will only place a Limit order if the Stop price is reached, while the latter will be placed instantly in the order book.

For example, if BNB is trading at $600 and you place a Sell Stop-Limit order with the Stop price at $590. This means that if BNB drops to $590, the system will automatically place a Sell Limit order with the Limit price you specified (e.g. $585). However, there is no guarantee that your Limit order will be filled. If the market moves too fast, it is likely that your order will not be filled.

Stop-limit and Stop-loss order

Stop-limit and Stop-loss orders are triggered based on your Stop price. However, the Stop-limit order, once triggered, will create a Limit order, while the Stop-loss will create a Market order.

When to use a Limit order?

You can use a Limit order when:

• You want to buy or sell at a specific price other than the market price

• You are in no hurry to buy or sell immediately

• You want to lock in unrealized gains or minimize potential losses

• You want to divide your orders into smaller Limit orders to make a scheduled investment (DCA).

Please keep in mind that even if the limit price is reached, your order may not always be filled. This depends on market conditions and overall liquidity. In some cases, your limit order may only be partially filled.

How to place a Limit order on Binance?

Let’s say you want to buy BNB at a lower price than the current bid. You can place a Limit order to buy and specify a maximum price you are willing to pay.

1. Log in to your Binance account and go to [Trader] on the top navigation bar. Choose [Classic] or [Advanced] trading view. In this example, we will use [Classic].

2. Go to the search bar on the right side of your screen and type in “BNB”. Choose the BNB pair you want to trade. We will select [BNB/BUSD].

3. Scroll down to the [Spot] area and select [Limit]. Then, set the price and amount you want to buy. You can also set the purchase amount by clicking the percentage buttons, so you can easily place a Limit sell order for 25%, 50%, 75% or 100% of your balance. Click [Buy BNB] to confirm.

4. You will see a confirmation pop-up on the right side of the screen, and your Limit order will be placed in the order book.

To manage your open orders, go to [Open Orders]. The Limit order will only be executed if the market price reaches your limit price. If the market price does not reach the set price, the Limit order will remain open.

To conclude

A Limit order can be a great trading tool when you want to buy or sell a currency at a certain price. You can use it to lock in unrealized gains or limit the risk of loss. But before you choose an order type, you need to understand the different options and evaluate how each fits into your overall portfolio and trading strategy. If you’d like to learn more about the different order types, check out our article Understanding the Different Order Types.