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Limit Orders

Limit orders give you precise control over your trade execution price by only executing when your specified conditions are met.

How Limit Orders Work​

When you place a limit order:

  1. Price Specification: You set the exact price at which you want to trade
  2. Conditional Execution: Order only executes if market reaches your specified price
  3. Queue Position: Your order joins the order book and waits for matching
  4. Partial Fills: Large orders may execute in multiple smaller transactions

Types of Limit Orders​

Buy Limit Orders​

  • Execute only at your specified price or better (lower)
  • Used to enter positions at favorable prices
  • Will not execute if market price stays above your limit

Sell Limit Orders​

  • Execute only at your specified price or better (higher)
  • Used to exit positions at target prices
  • Will not execute if market price stays below your limit

When to Use Limit Orders​

Limit orders are ideal when:

  • Price Precision Matters: You have a specific target price in mind
  • Market is Volatile: You want to avoid overpaying during price swings
  • Strategic Entry/Exit: You're implementing a specific trading strategy
  • Large Positions: You want to minimize market impact
  • Patient Trading: You can wait for favorable prices

Placing a Limit Order​

  1. Select your desired market
  2. Choose your position (Yes/No or specific outcome)
  3. Select "Limit Order" as your order type
  4. Set your limit price
  5. Enter your trade amount
  6. Choose order duration (Good Till Cancelled, etc.)
  7. Review and place your order

Order Duration Options​

Good Till Cancelled (GTC)​

  • Order remains active until executed or manually cancelled
  • Most common option for strategic positions

Fill or Kill (FOK)​

  • Order must execute immediately in full or be cancelled
  • Useful for large orders requiring complete execution

Immediate or Cancel (IOC)​

  • Execute any portion immediately, cancel the rest
  • Good for testing market liquidity

Example Scenarios​

Scenario 1: Strategic Entry​

Market: Presidential Election - Candidate A to Win Current Price: $0.72 Your Limit Buy Order: $0.65 for $200

Outcome: Order waits in queue. If price drops to $0.65 or lower, you get filled. If price stays above $0.65, order remains pending.

Scenario 2: Profit Taking​

Your Position: 500 shares at $0.45 average cost Current Price: $0.68 Your Limit Sell Order: $0.75 for 500 shares

Outcome: Order waits for price to reach $0.75. If achieved, you sell at your target price for a solid profit.

Managing Limit Orders​

Monitoring Open Orders​

  • Check your Portfolio > Open Orders regularly
  • Orders may take time to execute
  • Market conditions can change while you wait

Modifying Orders​

  • You can cancel and replace orders with new prices
  • Consider adjusting if market conditions change significantly
  • Some platforms allow direct order modification

Order Expiration​

  • Set appropriate expiration dates
  • Review and refresh stale orders
  • Cancel orders that no longer align with your strategy

Advantages and Disadvantages​

Advantages​

  • Price Control: Execute only at acceptable prices
  • Cost Efficiency: Avoid overpaying in volatile markets
  • Strategic Flexibility: Implement complex trading strategies
  • Reduced Monitoring: Set orders and let them work

Disadvantages​

  • Execution Risk: Orders may never execute
  • Opportunity Cost: May miss market moves while waiting
  • Market Changes: Conditions may change before execution
  • Complexity: Requires more planning than market orders

Best Practices​

Setting Limit Prices​

  • Research Fair Value: Base limits on fundamental analysis
  • Consider Spreads: Account for bid-ask spreads in pricing
  • Allow Some Flexibility: Don't set limits too aggressively
  • Monitor Market Depth: Ensure sufficient liquidity at your price

Order Management​

  • Regular Review: Check and update orders frequently
  • Position Sizing: Don't tie up too much capital in pending orders
  • Risk Management: Set stop-losses alongside profit targets
  • Market Awareness: Stay informed about events affecting your markets

Common Mistakes​

  • Setting unrealistic limit prices that never execute
  • Forgetting about pending orders during market moves
  • Not adjusting orders when market conditions change
  • Using limit orders when speed is more important than price

Next Steps​

  • Learn about PMF Orders for fund investments
  • Explore Trading Best Practices for advanced strategies
  • Practice with small limit orders to understand execution patterns