Limit Order
Order Flow Analysis glossary · Order Book & Depth of Market
Definition
An order to buy or sell a specified quantity at a specified price or better, which rests on the limit order book until matched or cancelled. Passive participants submit limit orders and wait for the market to come to them — passive buyers rest on the bid and passive sellers rest on the offer. Limit orders supply liquidity to the book; they execute only if an aggressive participant on the opposite side crosses the spread to meet them.
Limit Order in plain English
A limit order is you telling the market "I'll only trade at MY price or better — otherwise I'll wait." You post it and it sits on the order book until someone else is willing to meet it, or until you cancel; you're the patient one, letting the market come to you. Because your order just sits there available for others to trade against, you're providing liquidity — you're the shelf-stock everyone else can grab from. It's like listing a concert ticket for $120 and waiting: nothing happens until a buyer decides that price is worth it.
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