Limit Order

A limit order is an instruction to buy or sell a security at a specific price or better, rather than at whatever price the market happens to offer. When you place a limit order, you are naming the worst price you are willing to accept; the order will only execute at that price or a more favorable one.

It works by sitting in the market's order book until a matching price shows up. A buy limit order at $50 will only fill at $50 or lower. A sell limit order at $50 will only fill at $50 or higher. If the market never reaches your price, the order simply doesn't execute, and it stays open until it fills, you cancel it, or it expires according to its time-in-force setting (a separate instruction that controls how long the order remains active, such as for the current trading day only or until cancelled).

The nuance that trips people up is that a limit order guarantees price, not execution. It's the opposite trade-off of a market order, which guarantees execution but not price. Many beginners assume a limit order will fill just because the price was briefly touched — but if there were sellers ahead of you at that same price, or the price only appeared for an instant, your order may never trade at all.

Another subtlety: a limit order can partially fill, executing part of the size at your limit price and leaving the rest open if the available shares at that price run out.