TL;DRAn order to buy or sell at a specific price or better. Limit orders give you full control over your entry price, but there's no guarantee the market will reach your level.
A limit order tells your broker: fill me at this price or better, or don't fill me at all. If you place a buy limit at 5,180, you'll only be filled at 5,180 or lower. If the market never drops to 5,180, your order sits unfilled until you cancel it.
Sell limit orders work the same way in reverse. A sell limit at 5,220 will only fill at 5,220 or higher.
Limit orders are the right choice when you have a specific price in mind and you're willing to miss the trade if the market doesn't reach it. This includes entering at a support or resistance level, taking profit at a predetermined target, and adding to a position at a better price.
Most experienced traders use limit orders for the majority of their entries and profit targets.
The tradeoff is simple: limit orders give you price control but no fill guarantee. Market orders give you fill guarantee but no price control.
In a liquid market like ES during regular trading hours, the difference is usually just one tick. But in fast markets or around major news events, a market order can fill several ticks or even points away from where you expected. A limit order protects you from this slippage.
The downside is watching the market move to your level and then reverse without filling yours. This is called getting edged and it's a normal part of trading with limits.
Limit orders at the same price are filled in the order they were placed. If there are 500 contracts ahead of yours at 5,200, all 500 need to be filled before yours gets executed. The market touching your price does not guarantee a fill.
This is why you'll sometimes see price trade at your exact limit level but your order remains unfilled. Price needs to trade through your level for you to get filled.
In fast-moving markets, price may touch your level for only a fraction of a second. The traders at the front of the queue get filled. The rest don't.
Buy limit at support
ES is trading at 5,210. You see strong support at 5,195 and place a buy limit order at 5,195.
If ES pulls back to 5,195, your order may fill. If it bounces at 5,196 and reverses higher, you miss the trade but you avoided overpaying. If it crashes through 5,195 to 5,180, your order fills at 5,195 and you're immediately underwater.
Profit target with limit
You're long 1 ES contract from 5,200. Your profit target is 5,215. You place a sell limit at 5,215.
When ES reaches 5,215, your sell limit is triggered and you lock in 15 points ($750). The order fills automatically without you needing to watch the screen.
Placing a limit order and assuming it will fill because price touched the level
Price at your level is not a fill. Volume must trade through your level. Check your order status, don't assume.
Using limit orders when you need to get out immediately
If you need an emergency exit, use a market order or a stop order. A limit order that doesn't fill while the market moves against you creates a much larger loss.
Setting limit orders too far from the current price
A limit order 50 points below the market will rarely fill during a normal session. Set realistic levels based on recent price action.