Lesson 4: 12.4: Limit Orders

Limit orders are instructions to buy or sell at a specific price or better. They prioritize price control over execution certainty, resting in the book until hit.

These resting orders form the passive 'liquidity' of the market. They act as protective buffers or roadblocks. A thick block of resting buy limit orders will absorb selling pressure, preventing price from falling easily.

★ Iceberg Orders: Large institutional limit orders are often broken into tiny visible chunks (icebergs) to hide their true size from other participants.

Because limit orders can be cancelled at any time before execution, market participants often submit large limit orders far from the current price to create the illusion of support or resistance, only to cancel them as price approaches. This manipulative practice is known as spoofing.