Limit Order

A Limit Order is an instruction to buy or sell a security only at a specified price (the limit) or better. It prioritizes price certainty over execution speed.

How Limit Orders Work:

• Buy Limit: Executes only at limit price or LOWER
• Sell Limit: Executes only at limit price or HIGHER

Example: Stock currently at $50.00

Order Type	Limit Price	Executes If...
Buy Limit	$48.00	Stock drops to $48.00 or lower
Sell Limit	$55.00	Stock rises to $55.00 or higher

Advantages:

• Price Control: Never pay more (or sell for less) than your limit
• Protection from Gaps: Won't fill at extreme prices
• Patient Accumulation: Buy on dips automatically
• Discipline: Enforces your strategy

Disadvantages:

• No Execution Guarantee: May never fill
• Partial Fills: Large orders may fill partially
• Missed Opportunities: Stock may move away from your limit
• Requires Monitoring: Need to manage unfilled orders

Types of Limit Orders:

1. Day Order: Expires at market close
2. GTC (Good-Til-Canceled): Remains active until filled or canceled
3. IOC (Immediate or Cancel): Fills immediately or cancels
4. FOK (Fill or Kill): Fill entire order or cancel completely

When to Use Limit Orders:

• Illiquid stocks with wide spreads
• Volatile market conditions
• When you're not in a hurry
• After-hours trading
• Large position sizes

Pro Tip: For buying, set limits slightly below current price to potentially get a better entry. For selling, set limits slightly above to capture more profit.