The Benefits of Using a Limit Order

By Stock Research Pro • January 26th, 2010

A limit order (also known as a “buy limit order” or a “sell limit order”) is a type of order stock investors use to buy or sell shares at a specified price or better, allowing investors to set the maximum price they will pay on a buy order or the minimum price they will accept on a sell order. Using a limit order, the investor can also dictate when the order can be canceled if not yet executed.

Limit orders are used to help investors avoid buying stock at a higher price or selling stock at a lower price than desired. Unlike a market order, the stock broker cannot guarantee that a limit order will be executed as it contingent on the behavior of the stock price. Although limit orders usually cost more to place than market orders, they can serve to protect the investor, especially when dealing with high-volatility stocks.


The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.


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