Limit Orders Explained

Most of the time, the buying and selling crypto tokens happens in real time. A user heads to an exchange, finds the token they want to buy or sell, and then executes an order. But Limit Orders allow you to set and forget trades to execute into the future.

In this blog, we explain what Limit Orders are, and how CoW Swap takes them to the next level.

What are limit orders?

Limit orders are orders to buy or sell tokens at a specified price within a specified time horizon. If the available price hits the target price within the time horizon, the order executes.

Another way of thinking of limit orders is you can set them and forget them. The orders will only execute if you get what you wanted. Didn’t get the price you wanted? No worries, you don’t incur any costs.

Limit orders can work for both buy orders and sell orders. One thing to note: the price you want is not guaranteed. So you can’t set unrealistic orders and expect them to be filled. Only orders that can be met or completed.

How are limit orders different from other trades?

There are lots of different types of orders you can place in crypto. But as a general rule, there are broadly two types: ones you place now, and ones you can place in the future.

Limit orders are used to make trades in the future. If you’re looking to make a trade now, these are commonly referred to as Market Orders.

The main difference between a market order and a limit order is that a market order lets you immediately trade a token at its current value, whereas a limit order allows you to signal intent to trade a token in future, but only if certain conditions are met.

Why should I use limit orders?

The first and perhaps most important reason for using limit orders is control. Crypto markets are volatile, meaning timing your trades can be tricky.

With limit orders you don’t need to wait around for the price to be right. You can set your orders, set how long you want them to be open for and then get on with your life.

Why are Limit Orders on CoW Swap different from others?

Limit orders from CoW Protocol differ from other limit orders products in DeFi because they are built on top of CoW Protocol’s unique architecture.

We say that CoW Protocol limit orders are, in fact, UN-limited, because they offer:

• Unlimited order management: traders can manage orders without paying fees, meaning they can set and cancel limit orders as much as they’d like without paying for gas. You would incur costs on other exchanges.

• Unlimited order placement: traders can use the same crypto balance to place many orders at once that can stay active for up to a year; CoW Protocol fills orders as they hit their limit prices, and stops filling them once a wallet runs out of sell tokens. When that happens, traders can top up their wallets to keep the orders flowing.

• Unlimited order surplus: traders get the price at execution time, so if a price falls below the trigger price, the upside belongs to them and not the order taker. Additionally, any price improvement generated by solvers finding more-optimal execution paths (i.e. finding a Coincidence of Wants) belongs to the trader

CoW Protocol offers the most-flexible limit order experience in DeFi. This experience is uniquely achievable thanks to CoW Protocol’s specific architecture, which leverages batch auctions to deliver fair and efficient outcomes for traders.

When placing market orders with CoW Protocol, users sign trade intents rather than actual transactions on-chain. CoW Protocol collects these intents into batches, and settles them in the most-efficient way possible (by auctioning them via a decentralized network of solvers).

Limit orders leverage this same innovative architecture, and it is because users sign intents rather than transactions that we are able to offer such a flexible, gasless limit orders product.

Another benefit unique to limit orders on CoW Protocol is that they are surplus-capturing.

Surplus-capturing means that the protocol can improve prices above-and-beyond what users expect when they place their limit orders. CoW Protocol generates surplus on behalf of its users by matching Coincidences of Wants within batches, and by capturing favorable price movements between the time orders are sent and the time they are settled on-chain.

As an aside: this also means that if you accidentally place an order much below market price, CoW Protocol’s smart contract will protect you from your mistake and execute the order at the best available price it can find.

But we haven’t stopped there! CoW DAO has been busy working on an overhaul of Limit Orders to make them even s-moooo-ther to use.

Below is an overview

Customize your input field orders

Trade your way. You can customize what inputs you use to calculate your order, giving you more flexibility to build orders that work for you.

Auto-calculate limit price for your trades

The new look Limit Orders will now automatically calculate the limit price for your trades, giving you a better understanding of what you will receive once your limit order has been executed.

Set limit prices in USD

You can now toggle between limit prices in the native currency or in US Dollars. No more secondary calculations, it all happens inside the Limit Order interface.

Preview estimated fill price before placing a trade

Yep, Limit Orders on CoW Swap will now show the estimated fill price before you place a trade.

Because CoW Swap uses intents, when you place a limit order on CoW Swap, you don’t have the option to pay gas separately - this is because the gas price is already covered by the solver.

To cover the cost, the solver has to wait until the market price of your asset is slightly better than your set limit price, so when the solver executes the order they get just enough extra to cover the gas.

This means that CoW Swap limit orders don’t execute exactly when the limit price is reached. Especially for small trades, the difference between the limit price and the actual price where the order is able to fill can be significant.

With this update, we will start calculating & showing the estimated fill price while the user is setting up their order, so they can understand whether their limit price is realistic or not.

Extended Order duration

In this upgrade, traders have more choice when it comes to how long they want their orders to last. You can specify anywhere between 5 minutes up to 1 year, so you can set and forget your trades and let CoW Swap do the rest.

More customization options than ever

Yep, there’s a lot more customization to come. Everything from partial executions, custom recipient features, to how Limit Orders display on your desktop.

Try limit orders on CoW Swap now.

We’ve written a how-to guide to guide you through the experience.

Moooooo 🐮