A limit order sets the maximum you will pay for a security or the minimum you are willing to accept on a particular transaction.
For example, if you place a limit order to buy a certain stock at $25 a share when its current market price is $28, your broker will not buy the stock until its share price reaches $25.
Similarly, if you give a limit order to sell at $25 when the stock is trading at $20, the order will be filled only if the price rises to $25.
A limit order differs from a market order, which is executed at the current price regardless of what that price is. It also differs from a stop order, which becomes a market order when the stop price is reached and is executed at the best available price.
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- Affinity fraud, Contingency order, Limit price, Price improvement, Stop-limit order, Stop order, Stop price
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