Author: Catherine
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In cryptocurrency, a limit price is a specific maximum price you're willing to pay to buy or a specific minimum price you're willing to accept to sell a digital asset. You set this price by placing a limit order on a crypto exchange. The order will only be executed if the market price reaches or "hits" your set limit price, or goes to a better price (lower for a buy, higher for a sell).
How Limit Orders Work
- Buy Limit Order: If you want to buy a cryptocurrency but believe its price will drop, you'd set a buy limit price below the current market price.
- Example: If Bitcoin is trading at $60,000 and you want to buy only if it drops to $58,000, you set a buy limit order at $58,000. The order executes if the price reaches or falls below $58,000.
- Sell Limit Order: If you want to sell a crypto at a profit and expect the price to rise, you set a sell limit price above the current market price.
- Example: If you hold Bitcoin and want to sell when it reaches $62,000, you place a sell limit order at $62,000. The order is executed when the price hits or goes above $62,000.
Key Benefits of Using a Limit Price
- Control: You maintain control over your entry and exit points, ensuring trades execute at prices you find acceptable.
- Strategy: It helps you stick to your trading strategy, especially in volatile crypto markets, by preventing forced trades at undesirable prices.
- Better Prices: You can potentially get a better deal than expected, as a buy limit order might execute at a price lower than your set limit, or a sell limit order at a price higher than the limit.
Important Considerations
- Execution Isn't Guaranteed: Even if the market price touches your limit price, your order may not be filled if there aren't enough matching buyers or sellers at that specific price, notes www.coinrank.io.
- Market vs. Limit: A limit price order differs from a market order, which executes immediately at the current market price without a specified limit, according to Binance.
