What is a Limit Order?

A Limit Order is an instruction that is given to a broker to buy or sell a security price or better, as this order types allow traders and investors to control the price at which their order is executed, rather than accepting the current market price. Let’s understand more about what is a Limit order.

Key Feature of Limit Order

Here are the key features of this:

No Guarantee of execution if the limit price is reached. And your demand may not be filled if there is not enough share available at that price, or if other orders are ahead of yours in the queue.
Partial Fills, where only part of your order can be executed at this price. And you may receive a partial fill, with the remainder to be staged open until the limit price is available for the rest.
Price Control, where the limit order gives you control over the price at which you can buy and sell. And reduces the risk of unfavorable price movement, which can occur with market orders.
Order Duration can be set for a single trading session. You can remain open until canceled, which, depending on the broker and the order instructions.

How Does a Limit Order Work?

Here is how this works:

Buy limit order: If you want to buy a share of a stock which is currently trading at INR 115, but you only want to pay INR 110 or less then this amount, then you can place an order by buy at INR 110, so the order will execute only if the stock price drops to INR 110 or below.
Sell limit order: If you own a stock tracking at INR 100, but you want to sell it only if it reaches INR 105 or morethen this amount, then you can place an order to sell at INR 105, so it will execute only if the price hits INR 105 or higher.

Conclusion

In conclusion, this tool is for investors who prioritize price control over speed. It may not always guarantee execution. So it helps you to avoid unfavorable prices in volatile or thinly traded markets. We hope this blog has been helpful to you.

About the Author

Saniya

I am a writer, and this sentence speaks louder than anything, I love to play with words because I have a passion for writing easy and good-quality content that reflects simplicity. Readers like content that is straightforward with simple language. My priority has always been to deliver content that connects with the reader.

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