Limit Order
A limit order can only be executed at your specific limit price or better. Investors often use limit orders to have more control over execution prices.
Keep in mind, limit orders aren't guaranteed to execute. There has to be a buyer and seller on both sides of the trade. If there aren't enough shares in the market at your limit price, it may take multiple trades to fill the entire order, or the order may not be filled at all.
With a buy limit order, a stock is purchased at your limit price or lower. Your limit price should be the maximum price you want to pay per share.
MEOW is currently trading at $10 per share, but you only want to pay $8 per share at most. You would set your limit price to $8. If there are shares available, your order will be filled or partially filled at your limit price or lower.
These examples are shown for illustrative purposes only. In general, understanding order types can help you manage risk and execution speed. However, you can never eliminate market and investment risks entirely. It’s usually best to choose an order type based on your investment goals and objectives.
With a sell limit order, a stock is sold at your limit price or higher. Your limit price should be the minimum price you want to receive per share.
MEOW is currently trading at $10 per share, but you want to receive at least $12 per share. You would set your limit price to $12. If there are buyers available, your order will be filled or partially filled at your limit price or higher.
These examples are shown for illustrative purposes only. In general, understanding order types can help you manage risk and execution speed. However, you can never eliminate market and investment risks entirely. It’s usually best to choose an order type based on your investment goals and objectives.
Limit orders that are considered to be aggressively high or low may be rejected due to the increased likelihood of them not being able to execute. Learn more by checking out our Help Center article on order rejections.