What is a Limit Order? Limit orders are trades on a currency pair where you wish to buy or sell your currency of choice at a particular rate. Contrary to a market order, a limit order allows you to exercise more control over your pricing and affect how much profit you end up making. The downside to limit orders is that they can take a long time to be fulfilled if the market isn't cooperative with your bid or ask price.
A limit order allows you to control the amount you trade for a particular currency. If you're following a trend and want to be sure you get in at a particular point on where you project it's going, a limit order is a very good way to ensure your target rate.
For example, you can place a limit order for AUD/USD for 1.0815. If the current rate is 1.0831, you have a 16 pips difference. It may be hours, days or even months before the pair trades for your intended rate, but when it does, you'll get it.
Another reason you might consider limit orders is because you can reduce your risk of loss and increase your likelihood of making a profit via their use. If you want to open a position on an especially volatile or low volume currency pair, this can be an excellent way to ensure you get it for the rate you want.
To use a limit order, begin by following the same steps you normally would to place a market order. Then, find where you select "limit order" and select it. At that point, enter your intended rate and whether you want your limit order to expire. Some limit orders will continue indefinitely until they're filled while others will expire at a certain time.
From that point onward, you may continue with your research, other trades or unrelated business. When the rate meets the one you establish, your position will open.
A similar type of order to the limit order is the stop order. It serves in a similar function but in a slightly different way.
A stop order is similar in that it's attached to a particular price. It's different in that once your intended rate is reached, a stop order becomes a market order and is fulfilled at the market's price. This can sometimes mean your ultimate bid or ask price ends up being worse than you intended.
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