Quick definition An order to buy or sell at a specified price or better. The order will only execute if the market reaches that price level or more favourable. What it is A limit order specifies the maximum price a buyer will pay or the minimum price a seller will accept. Buy limits execute at the specified price or lower. Sell limits execute at the specified price or higher. The order remains on the book until the specified price level is reached, the order is cancelled, or the session ends (depending on the time-in-force setting). Why it matters Limit orders are the foundation of modern financial markets. They form the limit order book. A limit order protects the submitter from adverse execution: a buyer at 100.00 cannot be filled at 100.50. The trade-off is execution uncertainty: the order may never fill if the market never reaches the specified price. Limit Order versus Market Order A market order executes immediately at the best available price. A limit order specifies the price threshold and may not execute at all. Market orders offer certainty of execution but no price certainty. Limit orders offer price certainty but no execution certainty. Practical example A trader wants to buy 1,000 shares. The current ask is $50.50. The trader submits a limit order to buy 1,000 shares at $50.00. If the price falls to $50.00, the order fills. If the price rises to $51.00 without reaching $50.00, the order remains unfilled. If the trader wants immediate execution regardless of price, a market order is the correct choice instead. Queuing behaviour When multiple limit orders rest at the same price level, they queue in order of arrival. On many venues, size priority or pro-rata matching rules apply instead. The submitter of a limit order has no control over queue position except through the time priority they earn by submitting first at that price. Where it applies Every venue supports limit orders. They are the standard vehicle for building a limit order book. The alternative is internalisation (matching the order against the broker's own inventory) or crossing (matching the order against another customer order without publishing to the public book). See also - Market order - Stop order - Stop-limit order - Immediate-or-cancel (IOC) - Good-til-cancelled (GTC)
