Forex Dictionary Terms

Limit Order

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Definition – What does Limit Order mean?

A limit order is a forex trading order that is executed when a preset level is reached. A take-profit order is a, technically speaking, a type of limit order that closes a position once the trigger level is reached. However, limit order is most commonly used to refer to orders that open a new position or add to an existing position when a currency pair’s price action hits the trigger point.

ForexTerms explains Limit Order

Forex traders use limit orders to set positions up in advance of the market’s price action. If a trader thinks a currency pair is going to decrease in value, he will set a sell limit order that is lower than the current market price. Once the price action dips below the specified threshold, the order is executed and the short position is opened. The trader can input multiple limit orders to add to the position if the price action keeps trending downwards. Limit orders often used in conjunction with take profit and stop loss order. This trio of orders allows a trader to leave an unmonitored trade open without fear of heavy losses.

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