A limit order is a type of order that allows users to set the transaction price and quantity for the orders they are willing to buy or sell. Once the market transaction price hit the specified price or better, the orders will be filled. The instruction issued by the limit order is to wait for the price to reach the specified price or better before buying or selling.
Example:
After you place a buy limit order for 1 BTC at 10,000 USDT, the system will immediately screen all the orders currently available on the book. If there is an order available to meet the above buying requirements, then the limit order would be triggered and executed. If not, the limit order will be added to the order book for the next order to be matched.
Advantages and risks
Advantages: Users can set the transaction price for the order to meet the needs of traders with specific trading strategies.
Risk: There is no assurance of execution for the order. If the specified price is failed to be reached, the order will not be executed. If the market price quickly surpasses the specified price, the order may also not be filled.
Factors need to be considered when placing a limit order
1. The volatility of trading assets. The transaction price should be set according to the volatility of trading assets. If the transaction price is set too high or too low, no execution would occur, or a long period of time is needed before execution.
2. Liquidity of assets.
3. Leverage technical analysis tools to assist in setting prices.
