Trading
Limit Order
An order to buy or sell a security only at a specified price or better — it may not execute if the price isn't reached.
Example
Placing a buy limit order at $48 on a stock currently trading at $50 means the order only fills if the price drops to $48 or lower — it won't buy at today's higher price.
Common Misconception
A limit order guarantees a price ceiling or floor, but it doesn't guarantee the order fills at all — if the stock never reaches your limit price, the order simply expires unfilled.
Why It Matters
Limit orders are the standard way to trade less-liquid stocks or options, where a market order could fill at a surprisingly bad price due to a wide bid-ask spread.