Limit order
An instruction to buy or sell only at a stated price or better. It joins the order book and waits, and may never execute.
Example
A limit to buy at 47.85 rests in the book until a seller is willing to meet it.
Important
The risk is not filling; the risk of the alternative is filling at whatever the queue contained. For a long-horizon buyer, missing by two cents costs less than slipping thirty.
Related terms
- Market order — An instruction to buy or sell immediately at whatever prices the order book currently offers, working through successive price levels until the full size is filled.
- Order book — The live, price-ranked list of all resting buy and sell orders for a security, showing how many shares are available at each level on each side.
- Bid-ask spread — The gap between the highest price a buyer will pay and the lowest a seller will accept. A cost paid on every round trip.
Lessons that explain it
All 578 terms in the Investing glossary