Orders & ExecutionResting Order
Limit Order
An order to buy at or below a stated price, or sell at or above it, guaranteeing price but not execution.
What Limit Order means
A limit order specifies the worst price the trader is willing to accept. A buy limit can only be filled at its limit price or lower, and a sell limit only at its limit price or higher, so the order can never be filled worse than requested. The trade-off is certainty of execution: if the market never reaches the level, or reaches it only for an instant with insufficient volume behind it, the order simply rests unfilled or is only partially filled.
On an order-driven venue a resting limit order adds liquidity to the book and is executed when an incoming market order crosses it. In retail forex the broker or its liquidity providers hold the order and trigger it when the relevant side of the quote touches the level; note that a buy limit is triggered by the ask reaching the price, and a sell limit by the bid reaching it, which is why price can appear to touch a level on the chart without the order filling.
Limit orders are used to enter on a pullback, to take profit at a target, and to work large size without paying the spread on every clip. Their main hazard is adverse selection: an order left resting through a news release may be filled just as the market breaks decisively through the level. Time-in-force instructions such as good till cancelled or good for day determine how long the order survives if it is not triggered.
Worked example
With EUR/USD trading at 1.0850, a trader who wants to buy only on a dip places a buy limit at 1.0820; if the ask falls to 1.0820 or below the order fills at 1.0820 or better, and if the market rallies instead the order never triggers.
Related terms
- Market OrderAn instruction to buy or sell immediately at the best price currently available in the market.
- Buy LimitA pending order to buy placed below the current market price, filled at that price or better.
- Sell LimitA pending order to sell placed above the current market price, filled at that price or better.
- Pending OrderAn instruction to open a position at a future price level, held by the broker until triggered or cancelled.
- Take ProfitA resting limit order that closes an open position once price reaches a chosen profit level.
Frequently asked questions
What does Limit Order mean in forex trading?
An order to buy at or below a stated price, or sell at or above it, guaranteeing price but not execution.
How does Limit Order work in practice?
On an order-driven venue a resting limit order adds liquidity to the book and is executed when an incoming market order crosses it. In retail forex the broker or its liquidity providers hold the order and trigger it when the relevant side of the quote touches the level; note that a buy limit is triggered by the ask reaching the price, and a sell limit by the bid reaching it, which is why price can appear to touch a level on the chart without the order filling.
What is an example of Limit Order?
With EUR/USD trading at 1.0850, a trader who wants to buy only on a dip places a buy limit at 1.0820; if the ask falls to 1.0820 or below the order fills at 1.0820 or better, and if the market rallies instead the order never triggers.
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