What is a Limit Order?
Learn how to control the exact price you pay or receive when buying or selling stocks.
Quick Answer
A limit order lets you set the maximum price you'll pay (when buying) or minimum price you'll accept (when selling). Unlike market orders, you have complete price control. The trade-off? Your order might not execute if the stock doesn't reach your price. For example: "Buy Tesla at $200 or less" or "Sell Apple at $185 or higher."
How Limit Orders Work
Buy Limit Order
You set the MAXIMUM price you'll pay
Stock: Microsoft trading at $380
Your order: "Buy 10 shares at $375 or less"
↓
If price drops to $375: Order fills ✓
If price stays at $380: Order doesn't fill ✗
You're telling the market: "I want this stock, but only if I can get a good deal"
Sell Limit Order
You set the MINIMUM price you'll accept
Stock: Apple trading at $180
Your order: "Sell 10 shares at $185 or more"
↓
If price rises to $185: Order fills ✓
If price stays at $180: Order doesn't fill ✗
You're telling the market: "I'll sell, but only at a profit target"
Limit Order Benefits
✓ Price Protection
Never pay more than you want. You set $100 limit, worst case you pay $100 (often less). With market orders, you might pay $105 in a volatile market.
✓ Buy the Dip Strategy
Set limit orders below current price to automatically buy if stock drops. Example: Stock at $100, set limit at $95. If it dips, you catch it. If not, no harm done.
✓ Take Profit Automation
Set sell limit above current price. Stock hits your target, automatically sells. You don't need to watch the market 24/7.
✓ Avoid Emotional Trading
Decide your price when you're calm, not in the heat of the moment. Order executes automatically at your predetermined price.
When Orders Fill vs Don't Fill
✓ Order Will Fill When...
- ✓Buy limit: Ask price drops to or below your limit
- ✓Sell limit: Bid price rises to or above your limit
- ✓High liquidity: Lots of buyers/sellers at your price level
- ✓Reasonable limit: You're not asking for an unrealistic price
✗ Order Won't Fill When...
- ✗Price never reaches your limit: Stock trends opposite direction
- ✗Low liquidity: Not enough shares available at your price
- ✗Too aggressive: Asking $50 when stock is $100 (unrealistic)
- ✗Order expires: You set it for Day Only and market closes
Common Questions
What if the stock never hits my limit price?
Your order won't execute. That's the trade-off—you protect yourself from bad prices but risk missing the trade entirely. Solution: Set realistic limits close to current price, or use Good-Til-Cancelled (GTC) orders that stay active for 90 days.
Can I get a better price than my limit?
Yes! Limit is your worst-case price. If you set buy limit at $100 but sellers are willing to sell at $99, you'll get filled at $99. Limits are price ceilings (buy) or floors (sell), not exact prices.
What's the difference between Day and GTC orders?
Day Order: Expires at 4pm ET if not filled. You need to resubmit tomorrow.
GTC (Good-Til-Cancelled): Stays active up to 90 days or until you cancel it. Most investors use GTC for limit orders.
Should I use limit orders for every trade?
For liquid stocks during normal hours, either works. Use limits when: trading illiquid stocks, after-hours, large positions, or when you're not in a rush. Use market orders when you need immediate execution.
Key Takeaways
- ✓Limit orders give you price control—set maximum buy or minimum sell price
- ✓Order only fills if stock reaches your limit price (or better)
- ✓Trade-off: price protection vs risk of missing the trade
- ✓Use GTC (Good-Til-Cancelled) to keep orders active for up to 90 days
- ✓Best for: illiquid stocks, after-hours, patient traders, large positions