A limit order is a specific order type that allows an investor to buy or sell a security at a particular price.
In order to create a limit buy, you have to specify:
Number of shares you want to buy
Limit price: price at which you want to buy
Time in Force: whether the order will be pending until canceled or for one day only
The order will be executed once the market price drops to or below the limit price.
For sell limit orders, the order will be executed when the market price hits the limit price or higher.
This strategy allows investors control over the prices of the securities they trade.
Investors using a buy limit order are guaranteed to pay the price listed or less. However, it’s important to note that even though the purchase price or selling price is secured, the order fulfillment is not—limit orders are not executed until the security price meets the order qualifications. If the security does not meet the intended price, the order goes unfulfilled.