2021-03-23 12:34:12
You are new to trading forex, trade coin on exchanges? But you don’t know what a limit order is? What is the buy limit? What is Sell limit? If so, please watch this article right away!
All your questions will be solved! Come on with CHK to see this article!
What is a limit order?
A limit order is an order a user places to buy or sell at a desired price. Usually buying lower or selling higher than the current price.
What is the buy limit?
Buy limit is a limit order when you are in a long position. It is easier to understand that you are looking to buy with an asset at a price lower than the current price.
In technical analysis, people buy at strong support because usually when price hits this zone it tends to bounce back.
For example: Gold price is currently at 1700 $. But you feel the current price is too high and think when gold reaches $ 1600 the price will go back up.
Furthermore you have identified this as strong support. Then you just need to place a buy limit order at $ 1600.
What is support and resistance?
What is Sell limit?
Sell limit is a limit order when you are in a short position. That means you are trying to sell an asset at a price higher than the purchased price. According to technical analysis, users often buy at a strong resistance zone because at that time the price tends to decrease when it hits this area.
For example: You bought gold for $ 1700. You want to sell gold for $ 1800 or have identified this price as a resistance zone.
At this point, you just need to place a sell limit at $ 1800. The rest is to sit and vibrate your thighs and match orders.
Advantages and disadvantages of limit orders
Advantages
- Suitable for those with lots of jobs that don’t have time to track the market
- Buy a price better than the current market price
- Simple, easy to operate
Defect
Missed buying or selling opportunities
The price does not decrease to the price you want, but has increased while you have placed a buy limit waiting there. Or you have set a Sell limit at a higher price but the price is not up so you can execute the order.
Losses when prices fall without braking
Even though you have bought a low price, if the price falls without braking, you can still lose money.
An example of a limit order in everyday life
If you are still confused with what I said earlier. Then take a look at this real-life example that you often meet for easy visualization!
Buy limit order
You have 2 billion VND in your hand. You are considering buying a piece of land. This land is sold by the seller with the amount of money you have 2 billion.
But now you do not need to buy land urgently and want to leave some money for something else, so you only spend 1 billion 8 to buy land.
When you can bid with the seller or just wait for the land to fall in price and buy. Buy limit orders work in a similar way. The above example is the order to buy limit of land 1 billion 8.
Sell limit order
You received a piece of land from your mother in Ben Tre. Because there is no need to live or do anything else, you want to sell this land for 1 billion.
And you also do not need money urgently, so those who ask to buy for 800, 900 million you do not sell. True 1 billion, then you will sell.
Do you see any similarities? This is a sell limit on your mother’s land for 1 billion.
Epilogue
Hopefully through this article, everyone has a better understanding of limit orders as well as know what a buy limit or sell limit is!
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Wished everyone success!
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