TRADING GLOSSARY

Limit order: controlling your exact entry and exit price

A limit order is an instruction to buy or sell at a specific price or better. A buy limit order executes only at the limit price or lower. A sell limit order executes only at the limit price or higher. Unlike market orders, limit orders give you price control — you know exactly the maximum you will pay or the minimum you will receive.

How limit orders work

If a stock is trading at $50 and you want to buy it only if it dips to $48, you place a buy limit order at $48. If the price drops to $48, your order fills. If it never reaches $48, the order remains unfilled. Similarly, if you own a stock at $50 and want to sell at $55, you place a sell limit order at $55.

Advantages

Price certainty — no slippage. Better entry or exit prices. Protection against sudden price spikes or crashes. No risk of overpaying during volatile periods. Useful for illiquid markets where market orders can fill at unfavorable prices.

Disadvantages

No guarantee of execution — the price may never reach your limit. Partial fills — only some of your order may execute. Risk of missing a trade entirely if the market moves away from your price. In fast-moving markets, limit orders may repeatedly miss as price moves through your level before the order can execute.

AskTrade recommends using limit orders for entries rather than chasing market orders, especially in volatile conditions.

Disclaimer: This is for educational purposes only and does not constitute financial advice. Trading involves significant risk of loss.

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AskTrade analyses are AI-generated and do not constitute financial advice.