A limit order is an instruction to buy or sell a security or currency at a specific price or better. For a buy limit order, the trade will only execute at the limit price or lower; for a sell limit order, it will only execute at the limit price or higher.

‍

‍

This type of order gives investors control over the price at which their trade is executed, but it does not guarantee that the order will be filled-if the market never reaches the specified price, the order remains unexecuted.

‍

For example, if you want to buy EUR/USD only if the rate drops to 1.0800 (below the current market rate), you can set a buy limit order at that level. The order will execute automatically if the market reaches your specified rate.

‍

Similarly, if you want to sell GBP/USD only if the rate rises to 1.3000 (above the current market rate), you can set a sell limit order at that level. The trade will only occur if the market rate reaches or exceeds your target, allowing you to potentially secure a better deal without constantly monitoring the market.

‍

Limit orders are commonly used when investors want to avoid paying more (or selling for less) than a certain price, especially in volatile markets or when they are not able to monitor prices constantly.

‍