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Limit Order vs Stop Order Difference and Comparison

what is limit order

The investor instructs the broker to cancel the limit order. Public lets you buy any stock with any amount of money — commission-free. When you open a new, eligible Fidelity account with $50 or more. Allows you to buy or sell a stock at the price you have set or a better price. Learn how stock traders who prefer to follow the trend can use trailing stops as an exit strategy. The above chart illustrates the use of market orders versus limit orders.

what is limit order

Rather than continuously monitor the price of stocks or other securities, investors can place a limit order or a stop order with their broker. These orders are instructions to execute trades when a stock price hits a certain level. A limit order is used to try to take advantage of a certain target price and can be used for both buy and sell orders.


With a buy limit order, a stock is purchased at your limit price or lower. Your limit price should be the maximum price you want to pay per share. The order will be held in the system until your trigger price of 16.40 is touched, and will then be submitted as a limit order. The risk of loss in online trading of stocks, options, futures, currencies, foreign equities, and fixed Income can be substantial. XYZ stock has a current Ask price of 34.00 and you want to use a Limit order to buy 100 shares when the market price falls to 33.50.

Now, let’s say you are ready to place a sell limit order on the same FHS stock from the previous example. However, you see that the current market price for FHS stock is $20. You would then set a limit of $36, which is what you want to sell the stock for. If the stock price for FHS increases to $36 or above, your what is limit order order will get triggered. As an investor, you can also use a stop-limit order to protect your trade. A stop-limit order can help reduce risks and combines a stop order with a limit order. When an investor uses a stop-limit order, the order executes at the set limit price once the stock price meets the stop price.

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Unless you’re watching the news closely, you might end up selling for $192 when you could have received more. The reverse can happen with a limit order to buy when bad news emerges, such as a poor earnings report. You may end up buying at a much higher price than you otherwise could have or now think the stock’s worth. Meanwhile, you could set your buy price too high or your sell price too low.

  • For example, imagine that you have set a stop order at $70 on a stock that you bought for $75 per share.
  • You’ll sell if its price falls to $15.10 or lower, so you place a sell stop order with a stop price of $15.10.
  • The investor can submit a market order or set a limit order.
  • Stock Warrants This advanced investing technique offers leverage on a stock’s price but is issued by companies.
  • These include white papers, government data, original reporting, and interviews with industry experts.

However, there is no guarantee that your limit order will be executed. If the market price never reaches the limit price, your trade will remain unfilled on the order book. Typically, a limit order can be placed for up to a few months, but it depends on the crypto exchange you are using. A buy limit order tells your broker to purchase shares once a stock falls below a certain price—the so-called limit price. With a sell limit order, a broker only sells your shares once the stock rises above a set limit price. A market order is an order to buy or sell a security immediately.

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A limit order allows an investor to sell or buy a stock once it reaches a given price. A buy limit order executes at the given price or lower. A sell limit order executes at the given price or higher. This can help protect you from paying too much for a stock or selling for less than you wanted. When you place a market order, it’s difficult to predict how much slippage might occur. But with limit orders, you know exactly how much you’ll pay for the number of shares specified in your order. A stop order is an order to buy or sell a stock at the market price once the stock has traded at or through a specified price (the “stop price”).

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