A Buy Limit Order is an order placed below the current market price.
That order will only trigger if the price were to reach that level.
The exact opposite is a Sell Limit Order.
You might be wondering:
“How does a Buy Limit Order work?”
Let’s say you want to go long on EUR/USD.
The exchange rate is now 1.1234.
But you think that you can get in at a lower price later.
So, what do you do?
You’ll set a Buy Limit Order at a price lower than 1.1234.
Take for example 1.1200.
The Buy Limit Order will be triggered if EUR/USD reaches 1.1200 or lower.
For instance, Facebook’s share price is $1,000.
But you think it’s too expensive to buy them now.
So you’ll set a Buy Limit Order at $990 and be in the trade when share price dips a little.
Fairly simple, right?