What is Limit Order?
A limit order is an instruction to buy or sell a security only at a specified price or better, giving the investor control over the execution price.
A limit order allows you to set the maximum price you are willing to pay when buying a stock, or the minimum price you are willing to accept when selling. For a buy limit order, the trade will only execute at your specified price or lower. For a sell limit order, it will only execute at your specified price or higher.
This provides price certainty and protects against buying too high or selling too low in a volatile market. However, there is no guarantee the order will be filled if the market price never reaches your limit. The order will remain open until it is executed, canceled, or expires.
ExampleIf Apple (AAPL) stock is trading at $180 and you want to buy it only if it drops to $175, you would place a buy limit order at $175. Your order will only be filled if the price reaches $175 or lower.