Limit Order
A limit order allows an investor to set the maximum price they are willing to pay when buying, or the minimum price they are willing to accept when selling, a security.
For example:
● A buy limit order will only be executed at the limit price or a lower price.
● A sell limit order will only be executed at the limit price or a higher price.
This type of order gives investors more control over the price at which they trade, but it does not guarantee that the order will be filled - as the market may not reach the specified limit price. Limit orders are often used when investors want to avoid paying more (when buying) or selling for less (when selling) than a set amount.
Why limit orders matter to investors
Understanding limit orders provides investors with knowledge of how they can:
● Specify the price at which they buy or sell a security
● Potentially avoid paying more or receiving less than they are comfortable with
● Manage risk more effectively in volatile or fast-moving markets
● Differentiate between order types based on speed versus price control
While limit orders can help protect against unfavourable prices, they carry the risk of non-execution if the market never reaches the desired level.