A buy or sell limit order is an order to sell or buy a certain amount of coins at a specific price.
How does it work? If you want to buy (long) BTC at $8,500 when the current market price is $8,600, you can place a limit order that won’t be filled unless the price you set becomes available. When that happens, your buy (long) order will be filled at $8,500.
The same applies for sell limit orders. If you want to sell (short) BTC at $8,700 when the market price is $8,600, you can place a limit order that will be filled once the price you set becomes available.
When placing a buy or sell limit orders, it’s important to note that:
A Buy/Long limit order is based on the Ask price. The buy limit order will only be executed when the asking price is at the limit price specified in the order.
A Sell/Short limit order is based on the Bid price. The sell limit order will only be executed when the bidding price is at the limit price specified in the order.
Bid price and Ask price are never the same, as it represents the different prices that buyers (long) and sellers (short) are willing to trade.
Limit orders will be executed based on Bid or Ask price, not the K-line.
Buy Limit Order (Example):
A trader is expecting the price of BTC to temporarily pull back then increase and wants to go long. He places a limit order (2) to Buy/Long BTC at $8,220.50 with a margin of $100 at 10x leverage. The K-line price (1) for BTC at the moment the limit order was placed is $8,325.47. Once the Ask price (3) reaches $8,220.50, the buy limit order will be executed.
Note: Buy limit orders will not be executed even when the Bid price reaches $8,220.50. It will only be executed when Ask price reaches $8,220.50.
Sell Limit Order (Example):
Another trader instead foresees the price of BTC will go bearish in the short term and may decrease from the current market price of $8,325 to $8,100. He places a limit order (2) to Sell/Short BTC at $8,240.90 with a margin of $100 at 10x leverage. The K-line price (1) for BTC at the moment the limit order was placed is $8,325.21. Once the Bid price (3) reaches $8,240.90, the sell limit order will be executed.
Note: Sell limit orders will not be executed even when the Ask price reaches $8,240.90. It will only be executed when the Bid price reaches $8,240.90.
Limit orders are incredibly useful to place orders in advance based on your analysis of the movement that a cryptocurrency price will make. It helps traders automate their orders and perform better trade management.
When is the buy or sell limit order executed on SnapEx?
The K-line price indicated on SnapEx is a weighted average of prices pulled from four large cryptocurrency exchanges. The purpose of the K-line is to show the most accurate market price for traders.
The K-line is a fair and transparent indicator, but not the price line by which limit orders are executed. Similar to how all other trading platforms work, limit orders are only executed when the Bid or Ask price is met (depending on the long or short order placed).