Limit Order

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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.

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