#Definition
A limit order is an instruction to buy or sell shares at a specific price (the "limit") or better. Unlike a market order that executes immediately at whatever price is available, a limit order will only execute when the market reaches your specified price.
In prediction markets, limit orders let you name your price. A buy limit at 0.45 or less; never more. A sell limit at 0.65 or more; never less. This control comes at the cost of potential non-execution if the market never reaches your price.
#Why It Matters in Prediction Markets
Limit orders are the primary tool for disciplined trading:
Price control
You never pay more (or sell for less) than you intended. This prevents the surprise costs that market orders can produce, especially in thin markets.
Reduced slippage
By specifying your price, you avoid walking through the order book and paying progressively worse prices for larger orders.
Lower fees
Most platforms charge lower fees for limit orders ("maker" fees) than market orders ("taker" fees). You're adding liquidity to the market rather than removing it.
Strategic entry/exit
Limit orders let you set targets in advance. Place a buy at your desired entry price and a sell at your profit target; the market executes automatically when conditions are met.
#How It Works
#Order Types
Buy limit order
Instruction: "Buy 100 Yes shares at $0.50 or lower"
Execution: Only if someone is willing to sell at ≤$0.50
If current ask is $0.55: Order sits in order book waiting
If current ask is $0.48: Order executes immediately at $0.48
Sell limit order
Instruction: "Sell 100 Yes shares at $0.70 or higher"
Execution: Only if someone is willing to buy at ≥$0.70
If current bid is $0.65: Order sits in order book waiting
If current bid is $0.72: Order executes immediately at $0.72
#The Order Book
Limit orders form the order book: the visible list of prices at which people are willing to trade:
Order Book for "Event X"
─────────────────────────
Asks (Sell Orders)
$0.58 - 200 shares
$0.56 - 500 shares
$0.55 - 300 shares ← Best Ask
─────────────────────────
$0.53 - 400 shares ← Best Bid
$0.52 - 600 shares
$0.50 - 800 shares
Bids (Buy Orders)
A buy limit at 0.53) and best ask ($0.55), potentially becoming the new best bid.
A buy limit at 0.53) and best ask ($0.55), potentially becoming the new best bid.
#Numerical Example
You want to buy Yes shares, currently trading at 0.57 (bid/ask).
Option 1: Market order
- Buy 200 shares immediately
- Pay 114
- Order filled instantly
Option 2: Limit order at $0.55
- Order sits on the book
- Waits for someone to sell at $0.55
- Eventually fills at 110
- Saved $4, but waited for execution
Option 3: Limit order at $0.54 (better than current bid)
- Becomes best bid
- More likely to fill than $0.50 but still below ask
- May fill at 108 if a seller accepts
#Fill Scenarios
| Limit Price | Current Market | Outcome |
|---|---|---|
| Buy at $0.50 | Ask at $0.55 | Waits (may never fill) |
| Buy at $0.55 | Ask at $0.55 | Fills immediately |
| Buy at $0.60 | Ask at $0.55 | Fills at $0.55 (better than limit) |
| Sell at $0.60 | Bid at $0.52 | Waits (may never fill) |
| Sell at $0.52 | Bid at $0.52 | Fills immediately |
#Examples
#Example 1: Patient Entry
You believe a market is overpriced at 0.60.
Strategy: Place buy limit at $0.60
- If news causes a temporary dip, you buy the dip automatically
- If it never dips, you never buy; no harm done
- No need to watch the market constantly
#Example 2: Taking Profit
You bought at 0.75.
Strategy: Place sell limit at $0.75
- If price reaches $0.75, you sell automatically
- Locks in your target profit
- You can step away knowing the order executes if price hits your target
#Example 3: Narrowing the Spread
The market shows bid 0.55 (5% spread).
Strategy: Place buy limit at $0.52
- You become the best bid
- If a seller arrives, they might accept 0.50 bid
- You save money compared to paying the $0.55 ask
#Example 4: Scaling Into Position
You want to buy $500 worth of Yes but not all at once.
Strategy: Layer limit orders
- Buy 100 shares at $0.55
- Buy 100 shares at $0.52
- Buy 100 shares at $0.50
- Buy 100 shares at $0.48
This "laddering" averages your entry price and ensures you buy more at lower prices.
#Risks and Common Mistakes
Non-execution
The biggest risk: the market never reaches your price. You might miss a winning trade because you tried to save a few cents.
Partial fills
Your order might only partially execute. You wanted 1,000 shares at $0.55, but only 200 were available at that price. You now have a smaller position than planned.
Being stubborn
Setting limits too far from market price can mean missing good opportunities. Balance price discipline with realistic execution expectations.
Stale orders
Limit orders can sit for days or weeks. Market conditions change. An order that made sense Monday might be inappropriate by Friday. Review and adjust outstanding orders.
Gaming and front-running
Visible limit orders reveal your intentions. Other traders can trade ahead of you or adjust their behavior based on your order. Large visible limits are particularly vulnerable.
#Practical Tips
-
Use limits by default: Only use market orders when speed is essential. Limits should be your standard approach
-
Set realistic prices: Check recent trading history. A limit 10% below market may never fill; 1% below has a better chance
-
Monitor your open orders: Review outstanding limits regularly. Cancel or adjust orders that no longer fit your thesis
-
Consider partial fills: For larger orders, expect partial execution. Plan for scenarios where only part of your order fills
-
Mind the spread: If the spread is 2%, placing a limit 1% below the ask puts you inside the spread with good fill probability
-
Use time-in-force settings: Some platforms let you set "good-til-canceled" (GTC) or "day only" orders. Choose based on your strategy
-
Layer orders for size: Instead of one large limit, use multiple smaller limits at different prices to average your execution
#Maker vs. Taker Fees
Limit orders often benefit from lower fees because they make liquidity (add to the order book).
- Maker Fee: Charged when your limit order sits on the book and someone else hits it. Usually lower (or even negative/rebate).
- Taker Fee: Charged when you place an order that executes immediately (like a market order). Usually higher.
Using limit orders is a key way to reduce trading costs.
#Related Terms
#FAQ
#Do limit orders guarantee execution?
No. Limit orders only guarantee your price if executed. If the market never reaches your price, your order sits unfilled. You get price certainty but not fill certainty.
#Can I cancel a limit order?
Yes, as long as it hasn't been filled. Most platforms let you cancel open orders at any time. Once filled (even partially), that portion cannot be undone.
#Do limit orders cost more to place?
Usually the opposite. Limit orders typically receive lower "maker" fees because they add liquidity. Market orders pay higher "taker" fees. On some platforms, limit orders are free to place; you only pay when they execute.
#What happens if the price moves past my limit?
If you have a buy limit at 0.48, your order fills at your limit (0.48), depending on platform mechanics. You won't pay more than $0.50, but you might pay less.
#Should I always use limit orders?
Almost always. Use market orders only when: (1) speed matters more than price (breaking news, fleeting opportunity), (2) the market is highly liquid with tight spreads, or (3) your order is small enough that slippage is negligible.