Sell limit order

A pending instruction with a price attached. It sits inactive until the market reaches the stated level and can only be filled at that price or better, where better for a sale means higher. That is why it rests above the current market: an instruction to sell at a level below the market would be executable straight away, which is not a limit order, and platforms reject it as an invalid price.

The same instruction does two different jobs. It opens a short position at a level above the market, and it closes a long one at a target, which is the mechanism behind a take profit attached to a long. In both cases the guarantee is over price rather than over execution: if the market never reaches the level nothing happens, and if it reaches the level but the interest resting there is taken by other participants first, the order can be passed over or filled in part.

Two details catch people. A sale is filled on the bid, which on most platforms is also the line drawn on the chart, so a sell limit triggers where it looks like it should, while its mirror image the buy limit triggers on the ask and therefore appears to trigger early by the width of the spread. And a limit does not sidestep a gap. Where a market reopens far above the level, the order fills at the opening price, which is better than the price specified and reflects a market that has moved a long way rather than an advantage secured.