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WIKI ANALYSIS| This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |
A limit order is an order to buy or sell securities at a specified price or better. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled. Usually you can specify if the limit order is "good for the day" or "good until canceled."
Limit orders are also called buy limit orders or sell limit orders.
Here is an example of a buy limit order. If stock ABC is at $15 and you want to buy it at $12, you set a buy limit order at $12. This guarantees you will pay no more than $12 a share for this stock. If the stocks falls to $12 or less, you will automatically buy the shares.
Here is an example of a sell limit order. If you own stock ABC which is at $15 and you want to sell it at $18, you set a sell limit order at $18. This guarantees that you will sell your stock for $18 or more.
Limit orders cost more than market orders.
Traders typically use limit orders on low-volume or high volatility stocks.
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