A limit order is an order to buy or sell a stock at a specific price or better. It doesn't guarantee your trade will be executed; however, it'll only be executed if the market reaches the price you've set. Simply put, it will ensure that you do not buy higher or sell lower than you want.
- A buy limit order is an order to buy at a specific price or lower
- A sell limit order is an order to sell at a specific price or higher
- Consider an example where the current market price of a stock is $100
- If you place a $95 buy limit order, it will be completed only when the price falls to $95 or lower
- If you set a sell limit order at 110$, it will only be executed once the price reaches 110$ or higher
The same logic applies to cryptocurrencies: replace stock with cryptocurrency.