Author: Livia Tay, MY
Last Updated: January 2, 2025
A Limit Order is an instruction to buy or sell a security at a specific price or better. Unlike market orders, limit orders give traders control over the price at which their trades are executed.
How Limit Orders Work
- A Buy Limit Order is placed at a price below the current market price, meaning the order will only be filled if the price drops to the specified limit or lower.
- A Sell Limit Order is placed at a price above the current market price, meaning the order will only be filled if the price rises to the specified limit or higher.
- The order will remain open until it is either executed at the specified price or canceled by the trader.
Disadvantages of Limit Orders
- Not Guaranteed Execution
The order may not be filled if the market price doesn’t reach the specified limit. - Delay in Execution
Traders may have to wait for the market to reach their desired price, which may result in missed opportunities if the price doesn’t hit the target.
Frequest Asked Question on Limit Orders
Q1: Why wasn’t my limit order filled?
A1: Limit orders are only executed when the market reaches your specified price. If the market doesn’t reach that price, the order remains unfilled.
Q2: Can I change or cancel a limit order?
A2: Yes, limit orders can be modified or canceled as long as they haven’t been filled yet.