Limit Order

A limit order is an order to buy or sell a security at a specific price or better. It is a type of order that is placed with a broker, who will then execute the order when the stock reaches the desired price.

Limit orders are used by investors who want to control the price at which they buy or sell a security. They are also used by investors who want to avoid market impact, which is the effect that a large order can have on the price of a security.

There are two types of limit orders: buy limit orders and sell limit orders. A buy limit order is an order to buy a security at a specific price or lower. A sell limit order is an order to sell a security at a specific price or higher.

When you place a limit order, you are telling the broker that you are only willing to buy or sell the security at the specified price or better. If the security does not reach the desired price, your order will not be executed.

Limit orders can be used to take advantage of market volatility. For example, if you believe that a stock is going to go up in price, you could place a buy limit order at a price that is below the current market price. If the stock does go up in price, your order will be executed and you will buy the stock at the lower price.

Limit orders can also be used to protect your profits. For example, if you own a stock that is increasing in value, you could place a sell limit order at a price that is above the current market price. If the stock does go down in price, your order will not be executed and you will keep your shares.

Limit orders are a valuable tool for investors who want to control the price at which they buy or sell securities. They can be used to take advantage of market volatility and to protect your profits.