Limit order

Two different tools share this name, and confusing them causes most of the trouble. **As a resting entry**, which is what our system means, a limit buy sits below price waiting for a pullback and a limit sell sits above. You pre-commit to a level and wait for the market to come to you. **Priced at or through the current market**, the same order type behaves nothing like that. It fills immediately, like a market order, but caps how bad the price can be. That falls straight out of the SEC's own definition, since a buy limit can only execute at the limit price or lower. It is a market order with a seatbelt, and it is the underrated use of the tool. ### The guarantee, and the hole in it The SEC and FINRA agree: a buy limit executes only at your price or better, a sell limit only at your price or better. Both are equally explicit that a limit order is not guaranteed to execute. FINRA puts it flatly, that if the market never matches or betters your limit while the order is live, it will not be executed. Traders hear "guaranteed price" and quietly drop the second half. ### Touching your level is not filling your order You are in a queue at that price, behind everyone who got there first. If price prints your level and leaves, the orders ahead of you filled and yours did not. You get to watch your exact level, and the move you called, and own none of it. There is a crowding angle as well. In Osler's FX order book study for the New York Fed, take-profit orders clustered hardest exactly *on* round numbers, and that clustering is the paper's explanation for why trends tend to reverse at those levels. Osler treats a limit order as the closest structural relative of a take-profit order, and notes the same pull in US stock limit orders, which clustered hardest at whole numbers and secondarily at the halves. The obvious level is both why bounces happen and a very crowded place to stand. The deeper cost is the one in the definition: a resting limit is a decision made in the past and executed by a market you were not watching. Use it when the fill price genuinely matters more than the fill. Skip it when being in the trade matters more than being in it cheaply.