Limit Order

A limit order is patient. It names the price at which the participant is willing to trade and then waits. A buy limit sits below the current market waiting for sellers to reach it. A sell limit sits above the market waiting for buyers to reach it.

A limit order gives up certainty of execution in exchange for control over price. If the market never reaches the order, it never fills. While it waits, however, it becomes part of the liquidity available to aggressive orders.

When a market order arrives, it can transact against the resting limit order. The aggressive participant gets immediate execution; the limit-order participant gets the price they chose. Once filled, that resting order has been consumed and is no longer available unless more liquidity is added. This simple interaction — aggression meeting resting limit orders — is the mechanical foundation underneath every candle in the framework.