Limit Order.

In plain English

A limit order is an instruction to buy or sell a security only at a specific price or better. A buy limit fills at your limit price or lower; a sell limit fills at your limit price or higher. You get control over the price you pay or receive, but the trade only happens if the market reaches your number, so it may fill partly or not at all. Investors use limit orders to avoid overpaying or to set a target sell price without watching the screen.

01Why it matters

A limit order protects you from a surprise bad price on a fast-moving or thinly traded stock, at the cost of possibly missing the trade entirely.

02The math, step by step

A stock trades at $50.20. You place a buy limit order at $50.00. If the price dips to $50.00 or below, your order can fill; if it never drops that far, your order simply does not execute.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT