What are Buy and Sell Limits in Trading?
When trading in the markets, people place pending orders. These are predefined price levels which signal a buy or sell order of an asset at some point in the future. Once the price of the instrument they are trading reaches a certain level, the order is executed. Next to Buy Stop and Sell Stop, two other popular pending orders traders place are the “Buy Limit” and the “Sell Limit”.
The Buy Limit is the price level set by the trader when they wish to buy their asset in the future. The key difference between a Buy Stop and a Buy Limit, is that the latter always infers a predefined price that is lower than the current market price, not higher. The same applies to Sell Limit, when the trader wishes to sell their asset in the future. The predefined price for the Sell Limit is not lower, but higher, than the current market price of the asset in question. Traders who set Sell Limits anticipate that the price of their asset will fall, usually after they have rallied (spiked up). In the case of Buy Limits, traders anticipate that the price of their asset will rise after they have declined.
