What are Limit Orders?
Limit orders are one of the order entry practices by which the trader tells his or her broker to buy or sell stock (or any other financial instrument) at a specified price. Limit orders can be practiced by any type of traders want to limit their risks, especially in volatile market conditions.
Limits can be placed to both buy and sell orders. If a trader practices a buy limit order, then he or she is telling the broker to buy a specific stock only when it is on or below a specific price. Example - $10 buy limit order for stock ABC is filled by the broker only if the price is $10 or below. Sell limits orders are practiced to tell the broker to sell a specific stock only when the price is on or above a specific value. Example - $15 sell limit order for stock ABC is filled by the broker only if the price is $15 or above.
Limit orders are filled only when the price is below (buy limit orders) or above (sell limit orders) the limit price. Thus some times it can take a long period for the filling of orders. Because of this difficulty in handling limit orders many stock brokers charge more commissions for these orders. More over limit orders for one stock are filled by the brokers as an order they receives it; so the process may extend to weeks or months if the price drop or rise is for a short-term.
Limits can be placed to both buy and sell orders. If a trader practices a buy limit order, then he or she is telling the broker to buy a specific stock only when it is on or below a specific price. Example - $10 buy limit order for stock ABC is filled by the broker only if the price is $10 or below. Sell limits orders are practiced to tell the broker to sell a specific stock only when the price is on or above a specific value. Example - $15 sell limit order for stock ABC is filled by the broker only if the price is $15 or above.
Limit orders are filled only when the price is below (buy limit orders) or above (sell limit orders) the limit price. Thus some times it can take a long period for the filling of orders. Because of this difficulty in handling limit orders many stock brokers charge more commissions for these orders. More over limit orders for one stock are filled by the brokers as an order they receives it; so the process may extend to weeks or months if the price drop or rise is for a short-term.
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posted by Daniel Pipitone at
12:42 AM
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