A limit order is a type of order in which a trader specifies the maximum or minimum price at which they are willing to buy or sell an asset. In the context of crypto trading, a limit order allows a trader to buy or sell a cryptocurrency at a specific price or better.
For example, if the current market price of Bitcoin is $50,000 and a trader places a sell limit order for Bitcoin at $55,000, the order will only execute if the market price reaches or exceeds $55,000. Conversely, if the trader places a buy limit order for Bitcoin at $45,000, the order will only execute if the market price falls to or below $45,000.
Limit orders are useful for traders who want to enter or exit a position at a specific price and do not want to monitor the market constantly. It can also help traders avoid slippage, which occurs when the market moves against the trader’s intended direction, causing the order to execute at a less favorable price than intended.