Definition
A limit order allows investors to set the maximum price they're willing to pay for a buy order, or the minimum price they're willing to accept for a sell order. Unlike market orders, limit orders guarantee price but not execution. A buy limit order will only execute at the limit price or lower, while a sell limit order will only execute at the limit price or higher. Limit orders are useful for controlling entry and exit prices but may not fill if the market never reaches the specified price.
Example
Placing a buy limit order for Microsoft at $350 means the order will only execute if the price drops to $350 or below. If the stock trades at $355 and never reaches $350, the order remains unfilled.
FAQ
What is Limit Order?
An order to buy or sell a security at a specified price or better.
Why is Limit Order important?
Limit Order helps investors evaluate trading mechanics and make more informed decisions.
Related Terms
Market Order
An order to buy or sell a security immediately at the best available price.
Stop-Limit Order
An order combining stop and limit features, becoming a limit order when the stop price is triggered.
Good-Til-Canceled (GTC)
An order that remains active until executed, canceled, or a broker-specified time limit.