Limit Order
An order to buy or sell shares only at a specific price or better. Limits execution risk but may not fill if the target price isn't reached.
Limit Order
A limit order is an instruction to buy or sell shares only if the stock reaches a specific price or better. The order provides price certainty but may never fill if the target price isn't reached.
Formula
Buy Limit Order: "Buy 100 shares at $149.50 or lower" Sell Limit Order: "Sell 100 shares at $152.00 or higher"
The order fills only if the stock touches your limit price or better.
Example
If Tesla (TSLA) is currently trading at $250 and you believe $245 is a fair price, you can place a buy limit order at $245. If TSLA falls to $245 or below, your order fills at $245 (or better, if the stock drops further). If TSLA never reaches $245, your order never fills, and you don't own any shares.
How to Interpret It
- Buy limit: You specify the maximum price you're willing to pay. The order executes only if the price falls to that level or lower.
- Sell limit: You specify the minimum price you're willing to accept. The order executes only if the price rises to that level or higher.
- Price control: Unlike market orders, you know exactly what price you'll pay or receive (or better).
- Risk of not filling: If the stock moves away from your limit price, the order never executes, and you miss the opportunity.
- Time limits: Most limit orders expire at the end of the trading day (day orders) unless you specify "good-till-cancelled" (GTC), which persists for 30-90 days.
Limitations
- A limit order may never fill if the stock doesn't reach your price. You might miss a trade entirely.
- During fast-moving markets, the stock can gap past your limit price without filling your order.
- A limit order can only partially fill if there's insufficient volume at your exact price.
- Some brokers charge higher fees for limit orders, or may restrict how long a GTC order can remain active.
Related Terms
- Market Order — immediate execution at market price
- Stop-Loss Order — an order that becomes active only if price moves against you
- Order Routing — how your order reaches the market
- Execution — how a trade is completed