In the context of cryptocurrency exchanges, the term “limit” refers to a type of order that allows investors to specify the exact price at which they wish to buy or sell a cryptocurrency. When placing a limit order, investors determine a specific price at which they want to execute their transactions. The order is only executed when the market price reaches the set limit price or a better one. This article discusses everything about what a limit is, how it works, and its role in cryptocurrency exchanges.
What is a Limit?
In cryptocurrency exchanges, the often-seen term “limit” is a type of order given by an investor or trader to buy or sell a specific cryptocurrency at a predetermined price or a better one. When a limit order is used, the investor indicates the price at which they want to buy or sell the cryptocurrency, and the order is only executed when the price reaches the specified level or surpasses it.
Execution of a limit order can take longer than market orders because it operates depending on the market reaching the specified price. If the set price is not reached, the limit order can remain open until the investor or trader cancels it, or the market reaches the desired price. It’s important for investors to consider market conditions and liquidity when setting a limit order. If the market volatility is high or there is no liquidity, the order may not be executed or may only be partially executed.
A limit order can be extremely beneficial for investors who want to set specific profit targets or protect themselves from unexpected price movements.
It’s necessary to review the specific rules and conditions related to the limit order of the crypto exchange, as there may be additional requirements or restrictions. Generally, a limit order provides more control and precision when buying or selling cryptocurrencies by allowing investors to determine the specific prices at which they want their trades to be executed.
How Does a Limit Work?
The question of how a limit order works on a cryptocurrency exchange can be explained in two steps: Buy limit order and sell limit order.
Buy Limit Order: If an investor or trader wants to buy a cryptocurrency at a specific price or a lower price, they can place a buy limit order. The desired purchase price is determined, and if the price reaches this level or falls below it, the order is triggered and executed. The investor or trader, by waiting for the price to reach the level they set, avoids paying more than they wish. For instance, if the current market price of Bitcoin 
$88,125 is $30,000, an investor or trader can set a buy limit order at $9,800. If the market price reaches or falls below $9,800, the given order is executed, and the investor or trader buys the specified amount of BTC at this price.
Sell Limit Order: The exact opposite of a buy limit order is a sell limit order. If an investor or trader wants to sell a cryptocurrency at a specific price or a higher price, they can place a sell limit order. They determine the desired sale price, and if the price reaches or exceeds this level, the order is triggered and executed. The investor or trader, by waiting for the price to reach the level they set, avoids selling at a lower price than they wish. For instance, if the current market price of Ethereum 
$3,060 is $2,000, an investor or trader can set a sell limit order at $2,500. If themarket price reaches or exceeds $2,500, the given order is executed, and the investor or trader sells the specified amount of ETH at this price.
Limit orders offer more control over buying and selling prices to investors and traders. It is important for investors and traders to set specific entry or exit points in the market…
