Limit orders can help boost your profits when trading make your trading more profitable and removes the need to watch the markets more closely.
- Limit orders can be used to enter a trade at a specific price and are not executed immediately.
- Limit orders are executed when the mark price (=index price) reaches the limit price.
- While limit orders guarantee entry at the price you specified (or better), if the market moves quickly, then you may miss an opportunity.
- Buy limit orders are added to ‘asks’ on the exchange’s order book, while sell limit orders are added to the ‘bids’ on the order book.
- Once limit orders are fulfilled, the trader is a 'market maker' if the limit orders are rested on the order book - providing liquidity to the order book and once the order is complete, no trading fees are incurred.
- If the limit order removes a resting order from the order book, the trader is a 'market taker' and is charged a fee.
- Technical analysis can inform the placement of limit orders, for example, support and resistance levels.
Limit Order Example
Suppose BTC-PERP is trading at $9,600 and you want to buy near a price of $9,000, you can use a limit buy order to do so.
Once you have submitted your order to buy at $9,000, it will appear in the “bid” half of the order book. Limit sell orders will appear in the “ask” half of the order book. The order book shows buying and selling interest for other trades at certain prices.
Your limit buy order will be executed once all other limit buy orders that are further above in the “bids” part of the order book are filled first. Similarly, for a limit sell order, it will be executed once all the “asks” below your order are filled.
If the mark price (=index price) does not touch $9,000, then your limit buy order will remain open until you choose to cancel it (and may cause a missed opportunity). However, if the mark price does touch $9,000, then your order will be executed.
Note that in volatile market conditions, your limit order may be filled near $9,000 as limit orders generally fill at your specified price or better. Also, if $9,000 is only briefly touched by the mark price, your order may be partially fulfilled and you will be filled on a proportion of your order. In this case, your limit order remains active and will be filled if the price point is revisited.
To change or cancel a limit order, click on ‘Close Position’, found in the open orders part of the platform. Once cancelled, you can then submit a new limit order. If your limit order has been filled already, it is too late to amend or cancel it.
How to Use a Limit Order
Limit orders can be executed on the Interdax platform using the Order panel on the top left-hand side. Click on 'Limit'.
After selecting whether you want to go long or short, choose the size of the position by entering a quantity. You can also use the sliding bar to choose the limit price for your order, which is the price at which the exchange executes your order.
Once the limit order has been confirmed, it will be displayed in the Active Orders tab of the Positions panel:
Click on 'Cancel' to cancel a limit order.
There are also several options for order flags at the bottom right of the order panel:
- GoodTillCancel: Your Limit Order remains active until you cancel it,
- ImmediateOrCancel: Any unfilled portion that is leftover after placement is immediately cancelled, and
- Post-only: ensures the limit order is added to the order book and is not executed immediately,
- Reduce-only: ensures that the limit order only acts to reduce an existing position,
- Hidden: ensures your limit order is not visible in the order book.
Hovering over ‘Buy Limit’ or ‘Sell Limit’ will display details about the number of contracts you are trading and the net position once executed:
The Buy and Sell buttons display a white bar if there is enough liquidity in the order book to execute the limit order immediately:
Once the limit order is submitted, a confirmation screen will appear.
Once confirmed, the order will be added to the order book and you will see your order in the box at the bottom under 'Active Orders'.
Your order with yellow font, as highlighted below, and on the trading chart.
Limit orders are not executed immediately. Traders can save on trading fees if their limit order was rested in the book, as they are a 'market maker' since they are adding liquidity to the order book. When the mark price reaches the limit price, the order will be fulfilled.
However, if your limit order removes a rested order, the trader is a market taker and pays a taker fee.
Once the mark price reaches the limit price, the limit order is filled and the position will appear in the 'Positions' tab.
Closing a Position with a Limit Order
Positions can also be closed with limit orders. Enter a limit price in the grey box in the positions tab and click on 'Close'.
Limit orders can be a useful tool to obtain better entries when combined with technical analysis. For instance, you can use support and resistance levels in placing limit orders, where a limit buy order would be placed at or just below an important support level.