What is a Buy Limit Order

What is a Buy Limit Order?

A buy limit order is a pending order to enter a long position on a security at a specified lower price. Buy limit is a pending order used on a market trending up and it’s placed below the current market price.

A buy limit order is part of the pending orders class, where an order is placed on a broker’s platform an remains inactive until filled. Only when it becomes filled the buy limit order becomes a market order.

Buy limit orders can be placed on several financial instruments, such as stocks and Forex CFDs. Buy limit orders can be set with time parameters, with an expiry date and time, or GTC (Good till Cancelled).

A buy limit order with an expiry date will be removed from the broker’s order book, if it’s not filled by the set time. If a buy limit order is set as GTC, it will remain open on the broker’s order book until it gets filled or is manually cancelled.

Buy limit orders are a great resource for traders wanting to enter the market, but without time to check the charts constantly. By setting a pending buy limit order, traders will be sure to enter the market, even if they are logged off their trading platform, or even if they are asleep.

On the MT4 and MT5 trading platforms, pending buy limit orders can also be set in conjunction with two other pending orders; stop-loss and take-profit.

This powerful combination of buy limit, stop-loss and take-profit pending orders, due to its versality, are widely used by scalpers and by day traders expecting market price bounces.

How to Place a Buy Limit Order on MetaTrader Desktop?

Buy limit orders can be placed on MetaTrader 4 and 5 desktop versions by selecting “New Order” from the navigation tab. When the trading terminal display opens up, find the fifth option, which by default is set to “Market Execution”, click the arrow on the right once and select “Pending Order”.

The bottom half of the trading terminal display will change from instant market execution orders, with a red sell by market and a blue buy by market buttons, to “Type”. By clicking the right arrow of this menu, you will see the four market pending orders available, including buy limit order.

Select the buy limit order type, fill in the “at price” field, set the lot size, set an order expiry, set a stop-loss and a take-profit level if you wish. The buy buttons on the MetaTrader platforms, in order to be easily identifiable, are always blue.

After setting all the parameters on the pending buy limit order, press the “Place” button (it will be in blue colour). As mentioned before, if you didn’t set any expiry parameters for your order, then the buy limit will remain open until filled by the broker or if you cancel it manually.

How to Place a Buy Limit Order on MetaTrader Mobile?

It is also possible to set buy limit orders, if you trade on the go, via your Android or iOS phone, and these orders have the same features of the buy limit orders of the MetaTrader Desktop version.

To place a buy limit order on MetaTrader Mobile, open the order terminal by touching the top right symbol that looks like a page with a “+”. The first order type that appears is the “Market Execution”, and by touching it MT4 mobile will display the four pending order types, including the buy limit order.

Select “Buy Limit”, and set all the parameters. You can select the lot size, set the buy limit price, set or not a stop-loss and take-profit level and the order expiration. When you’re ready and if you have set a correct buy limit price, touch the, now unblocked, “Place” button at the bottom of the screen.

How to Cancel a Buy Limit Order on MetaTrader Desktop and Mobile?

To cancel a pending buy limit order on MT4 just maximise (if it was minimised) the “Trade” tab. You will see all the current open orders, if applicable, and on the bottom half, on the “Type” column, you will find the pending buy limit orders.

To cancel the buy limit order, without any delays, just follow the row to the right and find the grey “x”. Press that and the buy limit order will be cancelled straight away.

To cancel a buy limit order on MetaTrader Mobile, open the “Trade” tab on your mobile terminal. You will see all the open orders, if applicable, on the “Positions” divider and right below it, on the “Orders” divider, the buy limit orders.

Select the buy limit order you wish to cancel, by long pressing it. A new popup will open with 3 options. Select the second option “Delete order”, and the buy limit order will be cancelled from the broker’s book instantly.

When Should Traders Use a Buy Limit Order?

Buy limit orders are a great tool for traders trading retracements on bullish trends. Different types of traders use the buy limit orders to make a profit, particularly the day traders using support/resistance strategies and traders using pivot points strategies.

The buy limit order can be used on an upward trend, by placing a pending order in advance to enter the market when the price retraces to a particular point (last low, or a support level), ensuring a greater probability of achieving a predetermined entry price.

For example, a trader using the pivot point strategy can place one, or several, pending buy limit orders across all the support levels (S1, S2, and so) below the pivot point, hoping for a price bounce on these levels.

In this case, we will recommend a buy limit order with an adequate, protective, stop-loss to protect the order against any unforeseen or volatile price breakouts.

Buy limit orders are also a viable option for traders using a support/resistance strategy, by placing a pending order, triggered at a strong support level on an uptrend. 

Conclusion

Buy limit orders are an excellent way to free traders from constantly screening a security’s price, especially for those who follow the price action of multiple instruments.

Pending buy limit orders can also be used on the stock markets for buying a security, without continuously keeping an eye on the charts, at a set price level.