What is a Limit Order?

A limit order is an order in which a specific price is set to buy or sell a security. If the price point is hit and there is sufficient volume at that price point or better, your order will be filled. Limit orders may be placed as "Day" orders which are good for the day only, or as "GTC" orders, which are good until cancelled.

A limit buy order is conditional buy order that will only execute if the price of the stock reaches a target price (your set price) or better/less.

For example, if Apple (AAPL) is trading at $100 and I want to buy it at a lower price, then I would select a limit buy order with a target price of say $97. This means that once Apple shares decline to $97, my Limit Buy order is activated and automatically becomes a market order filling at $97 or lower.

The use of Limit orders is most applicable to low volume or high volatility stocks. It is also important to note that some brokerage firms charge more for limit orders.

To see how to place limit orders at Wall Street Survivor, see How to place Limit and Stop orders video tutorial.

Can’t find the answer to your question? Contact us.

« PREVIOUSNEXT »