What it is
When placing a limit order, an investor specifies the maximum price they are willing to pay for a buy order or the minimum price they are willing to accept for a sell order. Unlike a market order, a limit order is not guaranteed to execute if the market price never reaches the specified limit. It provides price control but sacrifices immediate execution, remaining active until filled, canceled, or expired.
Limit orders are frequently discussed in trading strategies, particularly for managing risk and achieving precise entry or exit points. News articles might highlight how institutional investors use them to avoid market impact with large trades, or how retail investors can use them during volatile periods to prevent unfavorable fills. Understanding limit orders is crucial for controlling trade execution and managing potential slippage.
Why it matters
Limit orders give you control over the price you buy or sell at, helping you avoid unfavorable trades and manage risk, especially in volatile markets.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice