How Do ‘Limit Orders’ Mitigate Slippage Risk Compared to ‘Market Orders’?
A market order is executed immediately at the best available price, making it highly susceptible to slippage if the order book lacks depth. A limit order, however, specifies the maximum or minimum acceptable execution price.
If the market cannot meet the limit price, the order is not filled, completely eliminating negative slippage risk beyond the specified limit.
Glossar
Slippage Risk
Exposure ⎊ Slippage risk, within cryptocurrency derivatives and options trading, represents the potential for adverse price movement between the time an order is placed and its execution.
Negative Slippage
Mechanism ⎊ Negative slippage, within cryptocurrency derivatives and options trading, represents the discrepancy between the expected price of a trade and the price at which the trade is ultimately executed.
Limit Order
Instrument ⎊ A limit order is an instruction to trade an asset at a specified price or better, providing the trader with precise control over the entry or exit cost, unlike a market order.