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Limit order definition
A limit order is an instruction to buy or sell an instrument at a set price or better. It gives you price control, but it only fills if the market reaches your limit price.
A buy limit order fills only at your limit price or lower, and a sell limit order fills only at your limit price or higher. This stops you paying more than your maximum buy price or selling below your minimum sell price.
A limit order reduces slippage because it cannot fill at a worse price than the limit. It does not guarantee a fill, because the market has to reach your price with enough liquidity at that level. A limit order prioritises price; a market order prioritises execution.
Limit order Example
A stock CFD trades at USD 100, but you only want to buy at USD 95 or lower. You place a buy limit order at USD 95.
It fills only if the price reaches USD 95 or below. While the price stays above USD 95, the order sits unfilled.
To take profit on the same stock CFD, you could place a sell limit order at USD 105, which fills only if the price reaches USD 105 or higher.
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