Limit Orders
What is a Limit Order?
A limit order is a trade order that allows users to buy or sell assets at a specific price or better. Unlike market orders, executed immediately at the current market price, limit orders give traders more control by setting a predefined price at which the trade will be executed. This feature ensures that users only buy or sell an asset if it reaches their desired price point, which can be beneficial in managing risk and optimising trade outcomes.
Limit Orders vs. Market Orders
Limit Orders: Allow users to set specific prices for their trades, but the trade is not guaranteed to be executed unless the market reaches the desired price.
Market Orders: These are executed immediately at the current market price but offer no control over the price, potentially resulting in higher costs or lower returns due to slippage.
How Limit Orders Work
Buying with a Limit Order: When placing a limit order to buy an asset, the user specifies the maximum price they are willing to pay. The trade will only be executed if the market price drops to that level or below. For example, if a user sets a limit order to buy Token A at 1.00 ADA, the order will not be executed unless the price of Token A falls to 1.00 ADA or lower.
Selling with a Limit Order: When placing a limit order to sell an asset, the user sets the minimum price they are willing to sell. The trade will only occur if the market price rises to meet or exceed that level. For instance, if a user wants to sell Token B at 2.00 ADA, the order will only be filled if the price of Token B reaches 2.00 ADA or higher.
Key Benefits of Limit Orders
Price Control: Limit orders allow users to control the price at which their trades are executed. This can be especially useful in volatile markets, where prices fluctuate rapidly.
Risk Management: By setting a limit order, traders can ensure they don’t overpay for an asset or sell it for less than they want. This allows for more strategic trading decisions and helps avoid the risks of sudden market movements.
Avoiding Slippage: Since limit orders are only executed at or better than the specified price, they help traders avoid slippage—the difference between the expected price of a trade and the actual price at which it is executed.
Passive Trading Strategy: Limit orders allow for a “set and forget” approach. Traders can place their orders and wait for the market to reach the desired price without constantly monitoring market conditions.
Example of a Limit Order in Action
Buying Example: A user wants to buy 100 tokens of $SNEK, but the current price is 10 ADA per token, which they feel is too high. The user sets a limit order at 8 ADA, meaning the trade will only execute if the price of $SNEK drops to 8 ADA or lower. If the market reaches this price, the order will be automatically filled.
Selling Example: A user holds 200 tokens of $SNEK, currently valued at 5 ADA per token. They want to sell only if the price reaches 6 ADA. The user sets a limit order to sell at 6 ADA, ensuring the trade will only occur when the price hits or exceeds this target.
We can all wish the $SNEK memecoin were at 6 ADA per token.
How to Create a Limit Order on Minswap
Follow these easy steps to create and execute a limit order on the Minswap decentralised exchange.
Total time: 10 minutes
1. Connect your wallet
Click on Trade and select the token that you wish to swap. On the swap interface on the right, select Limit to start a limit order.
2. Input your payment amount
Select how much of your paying asset you wish to use in this limit order. In this case, we are using 5 ADA to swap for MIN tokens.
3. Set your limit price
Determine your limit price. In this case, we are selecting 10% below the market. When the price of $MIN drops 10% below the current market price, we will trigger a buy.
4. Select duration
In the bottom right of the limit price input box is the duration selection. Here you can set how long you want this action to be active for. In this case, we are selecting 1 week. This means the contract will expire in 1 week's time and assets used in the swap will be returned to our wallet if the conditions for trade aren’t met.
5. Place order
Check over your order details and click “Place order” to proceed.
6. Confirm the transaction
Enter your sending password to authorise the transaction. Click “Sign and Submit” to send your order for processing.
7. Success
Your order is now on-chain and will be processed when the conditions of the limit order are met.
Order Management
At any point in time, you can click on Your orders to access your active orders that are waiting for processing. Here you can manage orders that have yet to be processed, cancel, and return the assets to your wallet.
Manage your orders
Expand any order you wish to manage. Multiple orders can be selected at the same time and all cancelled. Select the orders you wish to cancel and click “Cancel.” Type in your wallet password and proceed with the process.
Limit orders are a valuable tool for traders who want more control over their trades by setting specific price points for buying or selling assets.
They help optimise trade outcomes by avoiding slippage, managing risk, and allowing users to execute trades only when favourable market conditions are met.
Using limit orders on platforms like Minswap can be an effective strategy for improving trading efficiency, especially in volatile markets. Limit orders let you trade while you sleep. Take advantage of them and grow your $SNEK bags.
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