Buy Limit Order

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DEFINITION of 'Buy Limit Order'

An order to purchase a security at or below a specified price. A buy limit order allows traders and investors to specify the price that they are willing to pay for a security, such as a stock. By using a buy limit order, the investor is guaranteed to pay that price or better, meaning that he or she will pay the specified price or less for the purchase of the security.

While the price is guaranteed, the filling of the order is not. In other words, if the specified price is never met, the order will not be filled and the investor may miss out on the trading opportunity.

 

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BREAKING DOWN 'Buy Limit Order'

A buy limit order ensures that negative slippage will not occur - the buyer will not get a worse price than he or she expects. Buy limit orders provide investors and traders with a means of precisely entering a position. For example, a buy limit order can be put in for $2.40 when a stock is trading at $2.45. If the price dips to $2.40, the order will automatically be executed.

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RELATED FAQS
  1. What is the difference between a buy limit and a sell stop order?

    A buy limit order is a specific type of buy order used to enter a market, while a sell-stop order is a sell order that can ... Read Full Answer >>
  2. When is a buy limit order executed?

    A buy limit order is only executed when the asking price is at or below the limit price specified in the order. Novice traders ... Read Full Answer >>
  3. What's the difference between a stop and a limit order?

    Different types of orders allow you to be more specific about how you'd like your broker to fulfill your trades. When you ... Read Full Answer >>
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