Glossary
Limit order
A limit order is an instruction to buy or sell a contract only at a set price or better, never worse. It waits in the order book until someone takes the other side at your price, unlike a market order that fills right away at whatever price is currently available.
On a trading-style exchange you control two things when you place an order: how many contracts and at what price. A limit order pins the price. You might say you will buy a contract for no more than 42 cents, or sell for no less than 58 cents. If nobody is offering those terms yet, your order rests in the order book as a standing bid or offer until the market comes to you, or until you cancel it.
The trade-off is speed versus price. A market order fills immediately by accepting the best price already posted, which is convenient but hands you whatever the book happens to show. A limit order protects you from a bad fill but may never execute if the market moves away from your number.
Suppose a contract is trading with a best offer of 40 cents (all figures hypothetical). A limit buy at 38 saves you two cents per contract if it fills, and fills nothing if the price keeps climbing.
Why it matters
Limit orders let you set the terms instead of taking them. That patience is one of the core habits an exchange rewards and a fixed-odds ticket cannot offer.