Limit Order

Limit Order is an order to buy or sell by setting the maximum price (for buy) or minimum price (for sell) at which you are willing to buy or sell.
Hence, when you buy shares/options, you will not pay at any price higher than the limit you set, and it’s even possible for the order to get filled at a price lower than the stated limit.
Similarly, when you sell shares/options, you will not receive at any price lower than the limit you set, and it’s also even possible for the order to get filled at a price higher than the stated limit.

While Limit Order has an advantage that you can be sure the order will be executed / filled at the limit price or better, the disadvantage of this order is that there is no guarantee that the order will be executed / filled.

As a result, in the case when the price has moved up while you are placing a buy order (particularly when the market is moving very fast at that time), the order may not get filled.
Therefore, if an order is not filled on Limit Order within a few seconds, you should check what the prevailing ask price is at that time, and then modify the order accordingly if you’re still interested to buy the shares/options.

Note:
Some brokers may charge different commissions between Market & Limit Orders.
Typically, due to more complexity / additional condition, the commission for Limit Order is more expensive than for Market Order.
Hence, you need to check your broker’s commission before placing a Limit Order.

For the list of other types of order, go to: Types of Orders in Trading.

Related Topics:
* Getting Started Trading
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* Learning Candlestick Charts
* Learning Charts Patterns