Limit Order

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What is a 'Limit Order'

A limit order is an order placed with a brokerage to buy or sell a set number of shares at a specified price or better. Because the limit order is not a market order, it may not be executed if the price set by the investor cannot be met during the period of time in which the order is left open. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled.

BREAKING DOWN 'Limit Order'

While the execution of a limit order is not guaranteed, it does ensure that the investor does not pay more than he or she is willing to. Depending on the direction of the position, limit orders are sometimes referred to more specifically as a buy limit order or a sell limit order. For example, a buy limit order that stipulates the buyer is not willing to pay more than $30 per share, while a sell limit order may require the share price to be at least $30 in order for the sale to take place.

Limit orders can have specific conditions added to them. An investor may indicate that the order must be executed immediately or canceled, which is called a fill or kill (FOK) order. They may also require that all desired shares be bought or sold at the same time if the trade is to be executed, which is called an all or none order.

Limit orders typically cost more than market orders because they can be more difficult to fill. Despite this, limit orders let investors get their specified purchase or sell price. Limit orders are especially useful on a low-volume or highly volatile stock.

RELATED TERMS
  1. Buy Limit Order

    An order to purchase a security at or below a specified price. ...
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    A buy order that is accompanied by a sell limit order above the ...
  3. Away From The Market

    An expression that is used when the bid on a limit order is lower ...
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  5. At Limit

    An order that sets a maximum limit on the buy price and/or a ...
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RELATED FAQS
  1. How do I place a limit order online?

    Learn how a limit order is placed, the types of stocks it is most useful for and the specifications placed with it to suit ... Read Answer >>
  2. How can I use a buy limit order to buy a stock?

    Learn how a buy limit order is used by an investor who wants to buy a stock at a certain price, and understand how limit ... Read Answer >>
  3. What's the difference between a market order and a limit order?

    Buy and sell trades with market orders at the present stock price and execute limit orders if the stock price falls within ... Read Answer >>
  4. Why do limit orders cost more than market orders?

    Learn the difference between a market order and a limit order, and why a trader placing a limit order pays higher fees than ... Read Answer >>
  5. Why is the execution of a limit order not guaranteed?

    Using a limit order to buy a stock can be helpful in securing certain prices, but the mechanics of a limit order can decrease ... Read Answer >>
  6. What are the advantages of a limit order over a market order?

    Understand the functional differences between a limit order and a market order and the respective advantages and disadvantages ... Read Answer >>
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