Glossary
Limit Order
An instruction to trade only at a stated price or better, which may go unfilled if that price is never reached.
A limit order names a price and refuses to do worse. A limit order to purchase at $50 will execute at $50 or below and never above. A limit order to sell at $50 will execute at $50 or above and never below. The broker holds it until the market comes to the number, the order expires, or it is cancelled.
The cost of that certainty is that nothing may happen at all. If the price never reaches the limit, the order simply sits there. Traders describe this as choosing price over speed, against a market order, which chooses speed over price.
Limit orders carry a duration. A day order expires at the close; a good-till-cancelled order persists for a period set by the brokerage. Which one is set changes what happens overnight, so it is worth reading the field rather than accepting the default without looking.
Learn this properly
Lesson 3: How Buying a Stock Actually WorksBrokerage accounts, what happens in the seconds after you press the button, and order types explained without the jargon.
Related terms
- Market OrderAn instruction to trade immediately at whatever price is currently available, rather than at a price you name.
- Brokerage AccountThe account that holds your investments and places your orders on an exchange, opened with a licensed broker.
- VolumeHow many shares changed hands over a period, usually reported as the total traded during a single day.
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