Limit Price
A limit price is the maximum price a buyer is willing to pay or the minimum price a seller is willing to accept when placing a limit order on an exchange.
✦ Key Insight
Using a limit price gives traders greater control over trade execution. Unlike market orders, limit orders help reduce slippage and prevent buying or selling at unexpected prices during periods of high volatility.
✕ Common Misconceptions
Setting unrealistic prices
Forgetting open limit orders
Assuming execution is guaranteed
Detailed Explanation
How It Works
A trader sets a specific buy or sell price. The order remains open until the market reaches that price, expires, or is manually cancelled.
FAQs
Does a limit price guarantee execution?
No. It guarantees price, not execution.
In Practice
Dig Deeper
Order Book
A real-time list of all buy (bids) and sell (asks) orders for a trading pair, showing market depth at different price levels.
Slippage
The difference between the expected price of a trade and the actual executed price, usually due to volatility or low liquidity.
Market Order
An order to buy or sell immediately at the best available current market price.
Limit Order
An order to buy or sell only at a specific price (or better) that you set.
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