What is a limit order?
A limit order is an instruction to buy or sell only at a specific price or better. A buy limit never pays more than your price, and a sell limit never receives less. The trade-off is that execution isn’t guaranteed: if the price doesn’t reach your limit, the order doesn’t fill.
How it works
- Buy limit: fills at your limit price or lower.
- Sell limit: fills at your limit price or higher.
Example: a stock trades at $50.20 and you place a buy limit at $49.80. The order sits in the order book and fills only if someone sells at 49.80 or less. If the price drops to 49.85 and bounces, you don’t buy.
If you set the limit above the current asking price, for example a buy limit at $50.30 when the ask is 50.20, the order fills immediately at the best available price, never above your limit.
Limit order vs. market order
- A market order guarantees execution, but not price. In fast moves or thin markets it can fill at a noticeably worse price than expected (known as slippage).
- A limit order guarantees price, but not execution. It may not fill at all, or fill only partially.
Neither one is better in every case: you choose what you’d rather lock in for each situation.
For example, if you place a buy limit for 500 shares and only 200 are available at your price, you may end up with 200 while the rest keeps waiting.
When to use one
- Planned entries in a specific zone, for example near support.
- Taking profits: a sell limit at your target closes the position if price gets there.
- Assets with a wide spread or low volume, where a market order can get expensive. We explain this in what the spread is.
- Outside regular hours: many brokers accept only limit orders in pre-market and after-hours trading.
You also choose how long it lasts: a DAY order is canceled at the close of the session, and a GTC order stays active until it fills or you cancel it, subject to the day limit your broker sets.
Example: you buy 200 shares at $30 with a target of $33. You place a sell limit at 33: if price gets there, you sell at 33 or higher, and the profit is at least 200 × 3 = $600 before costs. If the price climbs to 32.95 and turns around, the order doesn’t fill.
Common mistakes
The first is chasing the price: raising your limit again and again as the price moves away, until you end up paying exactly what you wanted to avoid. The second is believing it’s enough for the price to touch your level. Orders at the same price are filled in the order they arrived, so if others got there before yours, the price can touch your limit and move away without your order filling.
The third is forgetting about GTC orders. If conditions change, for example because the company reports earnings, an order placed weeks ago can fill in a context that has nothing to do with your plan anymore. Review your open orders regularly.
Ben · the MentorWith a limit order, you set the price. If the market doesn’t come to you, don’t chase it: another opportunity will come along.
Learn it in depth in lesson 1.4: Brokers, accounts and order types
In the course you practice it with real charts, pop quizzes and an exam that tells you whether you really got it. Start free with lesson 1.1; no card required.
Frequently asked questions
Why did the price touch my limit but my order didn’t fill?
Because orders at the same price are filled in the order they arrived. If others were ahead of yours and there weren’t enough sellers (or buyers) at that level, the price can touch it and move away without your order filling. It usually fills when the price trades through your limit.
How long does a limit order last?
It depends on the duration you choose. A DAY order is canceled at the close of the session if it hasn’t filled. A GTC (good ’til canceled) order stays active until it fills or you cancel it, although many brokers cancel it after a certain number of days.
Can I use a limit order to sell at a profit?
Yes. It’s the most common way to set a profit target: you place a sell limit at your target price and, if the market gets there, the position closes at that price or better. If it doesn’t, the order keeps waiting.
Related terms
Educational content from The Trading Path. Not a recommendation to buy or sell any asset.