A limit order is a key trading tool that allows traders to specify the maximum price for buying or the minimum price for selling. Unlike market orders, which execute at the current market price, limit orders provide greater control over trade execution. When placing a buy limit order, it executes only at the limit price or lower, ensuring no overpayment. A sell limit order executes at the limit price or higher, allowing sellers to secure profits. Limit orders are useful in volatile markets to avoid slippage but may not fill if the market doesn’t reach the specified price. Understanding limit orders is essential for effective risk management and trading strategy.
