Limit Order

A limit order tells your broker to buy or sell at a specific price or better. A buy limit is placed below the current market price — you're saying "I want to buy, but only if price comes down to my level." A sell limit is placed above the current price — "I'll sell, but only at a higher price."

The advantage of limit orders is price control. You know the worst price you'll get. The disadvantage is that the order might never fill — if EUR/USD is at 1.0850 and you set a buy limit at 1.0800, but price only drops to 1.0810 before rallying, you miss the move entirely.

Limit orders are particularly useful for trading around key support and resistance levels. Rather than sitting at your screen waiting for price to reach your desired entry, you set a limit order and walk away. The order sits on the broker's server and executes automatically if your price is hit. Just remember to also set your stop loss and take profit with the order.