A limit order is a type of order to buy or sell a stock at a specific price or better. It gives the investor control over the price at which trade is executed and assists in protecting profits and limiting losses. If the market price does not reach the specified limit price, the order will not be filled. It’s a helpful tool for buyers and sellers who are not in a rush and are willing to wait for a better price.
Related Questions
1. What’s the difference between a limit order and a market order?
A market order is an order to buy or sell a stock immediately at the best available current price. A limit order, on the other hand, only gets filled if the stock’s market price reaches the limit price set by the trader.
2. How long do limit orders last?
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Limit orders can last until the end of the trading day or until the order is filled or cancelled. Also, there are “Good ‘Til Cancelled” (GTC) orders which remain active until executed or cancelled by the investor.
3. Can limit orders be changed?
Yes. You can change the price or cancel a limit order before it has been executed. However, once the trade has been completed, you can’t change your limit order.
4. What is a stop limit order?
A stop limit order is a type of order that combines a stop order with a limit order. This means that once the stop price is reached, the trade will be executed at a specified limit price or better.
5. Are limit orders guaranteed to be filled?
No, limit orders are not guaranteed to be filled. They will only be executed if the market price reaches the limit price. If the market price doesn’t reach the limit price, the order remains open.