Order type limit
Family II · Orders
Not to be confused with limit order, stop limit order, sell limit order.
Order type limit refers to the limit order, one of the two basic order categories alongside the market order. It sets a maximum purchase price or a minimum sale price rather than prioritising immediate execution. The order rests in the book until it is filled, amended or cancelled.
How a limit order works
A buy limit is placed below the current market price and a sell limit above it, though a limit can also be placed on the opposite side of the market, where it may execute immediately against resting orders. The stated price is a boundary, not a guarantee: a buy limit fills at that price or lower, a sell limit at that price or higher.
Execution is not assured. If the market never trades through the limit price, the order stays open. Many venues apply time-in-force conditions such as day-only or good-till-cancelled, and some charge different commissions for orders that add liquidity versus orders that remove it.
Worked example
Where limit orders are used
Limit orders suit traders who prioritise price over certainty of execution, and they are common in less liquid instruments where a market order could move the quote sharply. The trade-off is fill risk: the order may be partly filled, filled in several tranches, or never filled at all. Venues differ in how they queue and display resting orders, and rules on order types, price bands and fees vary by exchange and jurisdiction.
Often confused with
- limit order
- A limit order is the general order type described here, whereas this entry treats the same mechanism as a named category; the visible sign is that both carry a stated price rather than a trigger price.
- stop limit order
- A stop limit order combines a stop trigger with a limit price and only becomes active after the stop is touched, while a plain limit order is live immediately; the visible sign is the presence of two prices, a stop and a limit.
- sell limit order
- A sell limit order is the sell-side instance of the limit type, placed at or above the market to exit a position, while the general limit order can be either a buy or a sell; the visible sign is the direction, sell rather than buy.