What is a limit order and how do you place a limit order?

Some time ago, we published an article about different types of crypto orders. This time, we’ll dive deeper into limit orders and how you can easily place a limit order on the Finst platform. Let’s first take a look at what exactly a limit order is.

What is a limit order?

A limit order is an instruction to buy or sell a cryptocurrency at a certain price or better. A common use of limit orders is when you expect the price of a crypto to drop and you want to buy at a lower price than the current one, or if you want to automatically take profit by selling crypto with a limit order.

For example, you might decide to buy Bitcoin (BTC), but only when the price drops to $58,000 or lower. In this case, it would be beneficial to place a limit order to buy Bitcoin with a limit price of $58,000. Your order will only be executed if the current market price is $58,000 or lower. The same happens if you place a limit order to sell Bitcoin at a limit price of $60,000. The order will then be automatically executed once this limit price is reached.

Now that we’ve looked at an example, let’s explore the pros and cons of limit orders.

Pros and cons of limit orders

The main advantage of limit orders is that you can seize market opportunities by trading automatically, saving time while having more control over your investment strategy.

Limit orders can have different validity periods. On our platform, you can choose from three validity options: Good Till Cancelled (GTC), End of Day, or a custom date. GTC is the default setting when you place a limit order. This means your order remains open in the market until it is executed or until you cancel it yourself.

On the other hand, limit orders do not guarantee execution if the specified price is not reached or if the quantity is not (fully) available in the order book. An order book is an electronic list of buy and sell orders for a cryptocurrency, organized by price levels. That’s why we always recommend actively monitoring your open orders.

How to place a limit order on Finst

Before we begin, make sure your account has a sufficient EUR balance to place your limit order if you plan to buy crypto.

1. Select the cryptocurrency you want to trade.
2. Click on “Buy” or “Sell”.
3. At the top right, you’ll see a button with “Market” and a downward arrow.
4. When you click this button, an order window will appear.
5. Here you’ll see three options: Market (selected), Limit, and Auto Invest.

6. Select “Limit”.
7. Now, following our earlier Bitcoin example, you can enter $58,000 in the “Limit Price” field and 1 in the “Quantity” field.

8. Before clicking the “Buy” button, review the option under the button on the right. Here you should see “GTC” with a downward arrow.
9. Click here; you can choose how long your limit order remains valid.

10. Once you’ve chosen the validity period for your limit order, click save.
11. Now you’re ready to click “Buy”.
12. Congratulations, you’ve just placed a limit order!

We hope you enjoy this highly requested new order type and wish you the best of luck trading!

Conclusion

A limit order gives you more control over your trading by buying or selling at a price you choose. Although there’s no guarantee that your order will be executed, it helps you automatically seize opportunities in the market. By choosing the right validity option and actively monitoring your orders, you can effectively use limit orders in your investment strategy.