What Is a Limit Order?
A limit order is an instruction to buy or sell a stock only at a specified price or better.
A buy limit order can execute at the limit price or lower. A sell limit order can execute at the limit price or higher.
Buy Limit Order Example
A stock currently trades at $52. You want to buy it only if the price falls to $50 or less, so you place a buy limit order at $50 for 100 shares.
Possible outcomes:
- The stock falls to $49.90: your order may execute at $50 or lower.
- The stock touches $50: your order may execute, depending on available shares and order priority.
- The stock stays above $50: your order does not execute.
- The stock reaches $50 but too few shares are available: your order may be partially filled.
Reaching the limit price does not guarantee execution.
Sell Limit Order Example
You own a stock currently trading at $48 and want to sell only for $52 or more. You place a sell limit order at $52.
The order can execute at $52, $52.10, $53, or any higher available price. It cannot execute below $52.
Advantages and Risks of Limit Orders
Advantages
- Controls the maximum purchase price
- Controls the minimum sale price
- Helps reduce unexpected slippage
- Useful for stocks with wider bid-ask spreads
- Useful when price matters more than immediate execution
- Commonly used for planned entries and profit targets
Risks
- The order may never execute
- The stock may move away without filling the order
- The order may receive only a partial fill
- Other orders may have priority at the same price
- A narrowly placed limit can cause you to miss the move
A limit order may not execute if the market moves beyond the limit before the order can be filled.
When Does a Limit Order Make Sense?
A limit order may be appropriate when you have a specific entry price or profit target, the stock has a wide bid-ask spread, the stock is moving rapidly, you're trading outside regular market hours, or price control matters more than immediate execution.
Many brokerage firms accept only limit orders during extended-hours sessions because liquidity can be lower and price differences can be larger. Exact policies vary by broker.
Limit Order FAQs
Does a limit order guarantee the price?
A limit order guarantees that an execution will not occur beyond the specified limit price. However, it does not guarantee that the order will execute.
Why did my limit order not fill when the stock reached my price?
The order may not have filled because other orders had priority, too few shares were available, the displayed quote didn't represent an eligible execution, or the price moved away before your order could be completed.
Can I use a limit order to stop a loss?
A normal sell limit order is usually placed above the current market price and isn't designed to trigger after a decline. A sell stop or sell stop-limit order is generally used for a price-triggered exit below the current market.
Do limit orders work after hours?
Many brokerage firms accept only limit orders during extended-hours sessions because liquidity can be lower and price differences can be larger. Exact policies vary by broker.
Related Order Types
- Market orders — prioritize speed over an exact price.
- Stop orders — trigger a market order once a price level is reached.
- Stop-limit orders — trigger a limit order once a price level is reached.
- Back to the full comparison