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A limit order is a particular kind of order that is used to purchase or sell a financial asset at a defined price or higher. A limit order specifies a price limit below which the deal should be performed, in contrast to a market order, which is instantly carried out at the current market price.
The highest price that a trader is ready to pay for a financial asset is specified when they place a limit order to buy it. In contrast, a trader who makes a limit order to sell a financial instrument specifies the lowest price they are prepared to accept for that asset. Until the trader fills or cancels the order, it is still in effect.
Limit orders can be utilized to close a trade at a set price, to reduce possible losses, or to profit from sudden price changes. For instance, if a trader thinks the price of a certain stock will decline, they can set a limit order to sell the stock at a higher price than the going rate in order to profit from any potential price increases before the stock declines.
Other trading tactics, such as stop-loss orders, can be used in conjunction with limit orders. A stop-loss order instructs the seller to sell a financial asset if the price drops below a predetermined threshold. A trader may be able to reduce their losses in the case of a quick market decrease by setting a limit order to buy at a lower price than the stop-loss order.
