A limit contract is a type of agreement used in trading that allows investors to buy or sell an asset at a specified price or better. This mechanism enables traders to set their target price for purchasing an asset or exiting a position without needing to constantly monitor the market.For buying, a limit order is placed below the current market price. If the asset reaches the specified price, the order is executed. Conversely, for selling, a limit order is set above the current price. This way, traders can ensure they’re buying low or selling high, ideally maximizing their profits.Limit contracts offer control over trading strategies and can help manage risk. However, there’s a possibility that the market may never reach the specified price, leading to missed opportunities. Overall, understanding and effectively using limit contracts can be an essential part of trading strategies in any market.