Limit Order

AAA

DEFINITION of 'Limit Order'

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.

INVESTOPEDIA EXPLAINS '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.

VIDEO

Loading the player...
RELATED TERMS
  1. At Limit

    An order that sets a maximum limit on the buy price and/or a ...
  2. At Best

    An order to fill a transaction at the most desirable price available, ...
  3. Day Order

    An order to buy or sell a security that automatically expires ...
  4. Fill Or Kill - FOK

    A type of time-in-force designation used in securities trading ...
  5. All Or None - AON

    A condition used on a buy or sell order to instruct the broker ...
  6. Limit Order Book

    A record of unexecuted limit orders maintained by the specialist. ...
RELATED FAQS
  1. Is it better practice to use a stop order or a limit order?

    Both stop orders and limit orders have their advantages and disadvantages; traders need to decide between the two based on ... Read Full Answer >>
  2. What does the variance between the bid and ask price of a stock mean?

    The variance between a security's bid price and its ask price, also known as the bid-ask spread, represents the different ... Read Full Answer >>
  3. Should I enter a limit order to buy a position with a bid and ask that are far apart?

    You face the risk of losing the spread in a security with a bid and ask that are far apart when you enter a market order. ... Read Full Answer >>
  4. How can I use a buy limit order to buy a stock?

    An investor uses a buy limit order to buy a stock at a specific price or better price. Unlike a market order that takes the ... Read Full Answer >>
  5. What are the advantages of a limit order over a market order?

    The primary advantage of a limit order over a market order is that the limit order guarantees market entry at the trader's ... Read Full Answer >>
  6. Why do limit orders cost more than market orders?

    Two common ways to trade stock are market orders and limit orders. A market order is the simplest type of stock trade; it ... Read Full Answer >>
  7. How do I place a limit order online?

    Nearly all trading orders can be placed online through a trading platform usually provided by a broker. A limit order is ... Read Full Answer >>
  8. How do I build a profitable strategy when spotting a Stick Sandwich pattern?

    Though the stick sandwich is not the most reliable candlestick pattern, it can still be used to create profitable trade strategy ... Read Full Answer >>
  9. What are the SEC (Securities And Exchange Commission) rules about OTC (over-the-counter) ...

    Market trades that occur over the counter (OTC) are less regulated by the Securities and Exchange Commission than those that ... Read Full Answer >>
  10. How do I build a profitable strategy when spotting a Symmetrical Triangle pattern?

    The symmetrical triangle chart pattern is generally considered a reliable continuation signal that lends itself easily to ... Read Full Answer >>
  11. How do I implement a forex strategy when spotting a Three White Soldiers Pattern?

    A forex trading strategy based on identifying a three white soldiers candlestick pattern is designed to profit from the pattern's ... Read Full Answer >>
  12. How do I build a profitable strategy when spotting a Rounding Bottom pattern?

    For investors looking to ride a new trend to profits, accurately identifying a reversal is the holy grail of chart analysis. ... Read Full Answer >>
  13. What are common strategies traders implement when identifying a Bullish Engulfing ...

    A bullish engulfing pattern is a chart pattern formed when the body of an up candle completely engulfs the body of a down ... Read Full Answer >>
  14. How long does it take a broker to confirm a trade after it is placed?

    The time that it takes to receive a confirmation after an order has been placed varies depending on the type of order placed, ... Read Full Answer >>
  15. What are the rules for placing stop and limit orders in forex?

    The high amounts of leverage commonly found in the forex market can offer investors the potential to make big gains, but ... Read Full Answer >>
  16. 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 >>
  17. Do stop or limit orders protect you against gaps in a stock's price?

    Many individuals are hesitant to invest in the stock market because of the large gaps in prices talked about in the news. ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Understanding Order Execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
  2. Active Trading Fundamentals

    A Look At Exit Strategies

    Setting appropriate exit points should help you avoid taking premature profits or running losses.
  3. Forex Education

    How To Place Orders With A Forex Broker

    Learn how to set each type of stop and limit when trading currencies.
  4. Active Trading Fundamentals

    The Basics Of Trading A Stock

    Taking control of your portfolio means knowing what orders to use when buying or selling stocks.
  5. Options & Futures

    Protect Yourself From Market Loss

    There are several simple strategies you can use to protect yourself from downside risk.
  6. Active Trading Fundamentals

    Stimulate Your Skills With Simulated Trading

    Think you can beat the Street? We'll show you how to test your abilities without losing your shirt.
  7. Investing Basics

    Explaining Buy Limit Orders

    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.
  8. Trading Strategies

    Making The Trade: Understand Order Types

    Buying and selling stock can be a lot like buying or selling a car. Traders should use and understand tools such as market orders, limit orders, day orders, and good-'til-canceled orders to ensure ...
  9. Trading Strategies

    Patience Is A Trader's Virtue

    Waiting may be the biggest key to reeling in that trophy investment.
  10. Investing Basics

    Narrow Your Range With Stop-Limit Orders

    With stop-limit orders, buyers protect themselves from prices too high for their tastes.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!