Limit order
Family II · Orders
Not to be confused with stop order, stop limit order, sell limit order, buy limit order.
Limit order is an order type that sets a maximum purchase price or a minimum sale price. It is executed only if the market trades at that price or a more favourable one, so the trader controls price but not the certainty of execution. Unfilled limit orders rest in the order book until they are filled, amended or cancelled.
How a limit order works
A limit order specifies a side, a quantity and a limit price. A buy limit is placed below the current market price and a sell limit above it, though a trader may also place a limit order on the same side as the prevailing price. The order is matched against incoming orders at the limit price or better; if no such counterparty exists, the order rests in the book.
Execution is not guaranteed. The order may be partially filled, filled in several tranches, or never filled. Many venues apply price-time priority, so an order at the same price as an earlier one is filled after it. Time-in-force instructions such as day, good-till-cancelled or immediate-or-cancel determine how long the order remains active, and these options vary by broker and venue.
Worked example
A trader wants to buy 500 shares of a stock currently quoted at 50.20 / 50.25 and is unwilling to pay more than 50.10.
Limit orders compared with market orders
A market order prioritises execution and accepts whatever price is available, which exposes the trader to slippage. A limit order prioritises price and accepts the risk of no execution. In fast or thin markets, a limit order may be filled only partially or not at all, while a market order may fill at a price materially away from the last traded price.
Often confused with
- stop order
- A stop order becomes a market order once a trigger price is reached, so it offers no price protection after triggering, whereas a limit order never converts to a market order and never fills beyond its stated price; the visible sign is that a stop order carries a trigger price and a limit order carries a limit price.
- stop limit order
- A stop limit order combines a stop trigger with a limit price, becoming a limit order only after the trigger is hit, while a plain limit order is active immediately at its limit price; the visible sign is the presence of two prices on a stop limit order and one on a limit order.
- sell limit order
- A sell limit order is the sell-side instance of a limit order, setting a minimum acceptable sale price, whereas the general term limit order may refer to either side; the visible sign is the order side shown as sell rather than buy.
- buy limit order
- A buy limit order is the buy-side instance of a limit order, setting a maximum acceptable purchase price, whereas the general term limit order may refer to either side; the visible sign is the order side shown as buy rather than sell.