What is Limit Order?
Quick Answer
A Limit Order is a type of order placed on an exchange to buy or sell a stock at a specific price or better.
" Think of a Limit Order as your way of telling the market: 'I refuse to pay retail!' It's like haggling without the awkward eye contact. "
BORING DEFINITION
A Limit Order is a type of order placed on an exchange to buy or sell a stock at a specific price or better. It allows investors to specify the maximum price they are willing to pay when buying or the minimum price they are willing to accept when selling. This gives traders more control over the prices they trade at, unlike market orders which execute immediately at current prices.
How Does Limit Order Work?
When you place a limit order, it is recorded in the exchange's order book and waits for the market price to reach your specified level before executing. If the market never reaches that level, your order remains unfulfilled. This ensures that you get your desired price but also risks missing out if prices move away from your target.
Why it matters: Understanding limit orders is crucial for managing risk and executing trades at desired prices rather than accepting unfavorable market conditions.
REAL WORLD EXAMPLE
> Jane placed a limit order to buy 100 shares of TechCorp at $50 per share. The current market price was $52, so her order sat in the system until the price dropped to her specified amount.
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