Limit order

An instruction to buy or sell at a specified price or better. Instead of executing immediately it rests on the order book until the market reaches that price, so you control the price but not whether the order fills at all.

Definition

A limit order tells the exchange the worst price you are willing to accept. A buy limit executes at your price or lower, a sell limit at your price or higher. Until the market comes to you, the order sits on the order book unfilled.

Limit versus market

A market order takes whatever price is available right now: it fills almost certainly, but you find out the price afterwards. A limit order flips that trade-off. You fix the price and accept that the fill is uncertain.

Which one fits depends on what you cannot afford to get wrong. If you need to be out of a position, price uncertainty is the cheaper problem. If you are building a position patiently, a bad fill is.

What it costs and what it saves

A limit order that rests on the book adds liquidity, so it is usually charged as a maker fee rather than a taker fee. That is the small structural saving. A limit order placed close enough to the current price to fill instantly is treated as a taker anyway, because it consumed liquidity rather than providing it.

If you want the guarantee that your order never takes liquidity, a post-only order is the stricter variant.

Where it goes wrong in practice

The two failure modes are opposites. A limit order priced too far from the market never fills, and the move you were positioning for happens without you. A limit order left on the book and forgotten fills days later, in a market you no longer wanted exposure to.

On thin books a large limit order also reveals your intent: it sits there visibly, and other participants can trade around it.

Where you will run into it

Every perpetual DEX with an order book offers limit orders as the default alternative to a market order, and stop limit orders are built on the same mechanic. On AMM-based venues, limit-style behaviour is usually simulated by a keeper that executes on your behalf once the price condition is met.