Limit Order

Limit Order: A limit order is an instruction to buy or sell a security at a specific price or better. It allows investors to set the maximum price they are willing to pay when buying, or the minimum price they are willing to accept when selling.

For example:

• If an investor wants to buy Shares of a Stock currently priced at $50, they might set a limit order at $48. The order will only execute if the Stock price reaches $48 or lower.
• Conversely, if the investor wants to sell Shares currently priced at $50, they could set a limit order at $52. The order will only execute if the Stock price reaches $52 or higher.

Cases:

• Case 1: A trader sets a Buy Limit Order for 100 Shares of XYZ Company at $30. If XYZ’s price drops to $30 or lower, the order will be executed.
• Case 2: An investor places a sell limit order for 50 Shares of ABC Corp at $75. If the price rises to $75 or above, the order will be filled.
• Case 3: An investor’s limit order may not be filled if the market price never reaches the specified limit price, which can happen in volatile markets.