What is a limit order?

A limit order is a type of order to buy or sell a security at a certain price or better. In the case of limit buy orders, the order will only be executed at the limit price or at a lower price, and in the case of limit sell orders, only at the limit price or higher foreign exchange markets today. This arrangement allows traders to better control the prices they negotiate. By using a limit buy order, the investor is assured of paying that price or less. Although the price is guaranteed, the order will not be executed and limit orders will not be executed unless the price of the security meets the requirements of the order. If the asset does not reach the specified price, the order will not be executed and the investor may lose the trading opportunity. This is in contrast to a market order, in which a trade is executed at the current market price with no set price limit.




This is how limit orders work

A limit order is the use of a predetermined price to buy or sell a security. For example, if a trader wants to buy the shares of XYZ but has a limit of $ 14.50, he will only buy the shares at a price of $ 14.50 or less. If the trader wants to sell XYZ shares with a limit of $ 14.50, the trader will not sell any shares until the price is $ 14.50 or more. By using a buy limit order, the investor is assured of paying the price of the buy limit order or better, but there is no guarantee that the order will be executed for forex trading platforms in India. A limit order gives the trader more control over a security's strike price, especially if he is concerned about using a market order in times of high volatility. There are different times to use a limit order, for example. For example, when a stock goes up or down very quickly and a trader is concerned that a market order is being executed poorly. Also, a limit order can be useful when a trader is not looking at a stock and has a specific price in mind at which he wants to buy or sell that security. Limit orders can also be left open with an expiration date.

Real-World Example

A portfolio manager wants to buy shares of Tesla Inc (TSLA), but feels that its current valuation of $ 325 per share is too high and wants to buy the shares if they fall to a certain price. The prime minister ordered dealers to buy 10,000 Tesla shares if the price falls below $ 250, until further notice. The trader then places an order to buy 10,000 shares with a limit of $ 250. If the stock falls below this price, the trader can start buying the stock. The order remains open until the stock reaches the PM limit or the PM cancels the order. In addition, the prime minister is considering selling the shares of Amazon.com Inc. (AMZN) but believes that the current price of $ 1,350 is too low. The Prime Minister orders his dealer to sell 5,000 shares if the price exceeds $ 2,500, until further notice. The trader will then place the order to sell 5,000 shares with a limit of $ 2,500.



Limit Orders vs. Market Orders

When an investor places an order to buy or sell a stock, there are two main execution options in terms of price: placing the order "in the market" or "at the limit". Market orders are transactions that must be executed as quickly as possible at the current or market price. In contrast, a limit order sets the maximum or minimum price at which you want to buy or sell. He may think of buying stocks like buying a car best brokers in India for forex. With a car, you can pay the dealer's sticker price and receive the car. Or you can negotiate a price and refuse to close the deal unless the dealer meets your price. The stock market can be imagined in the same way. A market order deals with the execution of the order; The price of the security is secondary to the speed at which the transaction is completed. Limit orders are mainly about price; If the value of the security is currently outside the parameters defined in the limit order, the transaction will not go through.

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