Trading & Markets

Limit Order

An order to trade at a specified price or better, which rests in the book until filled or cancelled.

Provides liquidity, and typically earns a rebate or at least avoids paying the spread.

The trade-off: a better price, but no guarantee of execution. And the fills you do get are adversely selected - you fill when the market comes to you, which is disproportionately when it is about to keep going.

Where the risk hides. An unfilled limit order in a fast market means you did not get the trade you wanted, which is a real cost even though it never appears on a P&L statement.

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