Limit Order

Trading

Quick Definition

A Limit Order is an instruction to buy or sell a stock at a specific price or better, ensuring the trade happens only at the desired price.

Detailed Explanation

A Limit Order allows traders to control the price at which they buy or sell securities. Unlike market orders, it will only execute if the market reaches the specified price.

Trades are executed on exchanges like the National Stock Exchange and Bombay Stock Exchange, regulated by the Securities and Exchange Board of India.

How Limit Order Works

  • Buy Limit Order: Executes at the specified price or lower
  • Sell Limit Order: Executes at the specified price or higher

Limit Order vs Market Order

  • Limit Order: Price control, execution not guaranteed
  • Market Order: Immediate execution, price not guaranteed

Advantages

  • Better price control
  • Avoids unfavorable price execution

Risks

  • Order may not be executed
  • Missed trading opportunities

Example

"If a stock is trading at ₹100 and you place a buy limit order at ₹95, the order will execute only if the price falls to ₹95 or below."

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