A limit order lets you set the price you will pay or accept when you buy or sell a stock, instead of taking whatever price the market offers right now.
When you place a limit order, you tell your broker: "Buy this stock, but only if the price drops to $50 or lower" or "Sell this stock, but only if the price rises to $75 or higher." Your broker holds that order and fills it only when the market price hits your target. If the price never reaches your limit, the order stays open until you cancel it or it expires.
The tradeoff is simple: you get the price you want, but you might not get the trade at all. A market order (buy or sell at today's price) almost always goes through immediately. A limit order might never execute. This matters most when you are buying or selling a stock that moves fast or trades in low volume.
Key Takeaways
- A limit order only fills at your specified price or better, so you control the cost of entry or the proceeds of a sale.
- Your order may never fill if the stock price does not reach your limit before the order expires or you cancel it.
- Limit orders are free to place; your broker charges the same commission whether you use a market order or a limit order.
- Most brokers let you set a time limit on your order — good for the day, good for 30 days, or good until you cancel it.
Buy Limit Orders vs. Sell Limit Orders
A buy limit order sets a ceiling on what you will pay. You say "Buy 100 shares of XYZ, but only at $50 or less." If XYZ is trading at $52 right now, your order waits. If the price falls to $50, your order fills. If it never falls that low, you never buy.
A sell limit order sets a floor on what you will accept. You say "Sell 100 shares of XYZ, but only at $75 or higher." If XYZ is trading at $72 right now, your order waits. If the price rises to $75, your order fills. If it never rises that high, you never sell.
Both types sit in a queue called the order book. When the price moves to your limit, your order competes with others at that same price. Older orders usually fill first, so timing matters — you might be the tenth person waiting to sell at $75, and only the first five get filled before the price moves away.
How Long a Limit Order Stays Active
When you place a limit order, you choose how long it lasts. The most common options are:
- Day order: The order expires at the end of the trading day if it has not filled. This is the default at most brokers.
- Good-till-canceled (GTC): The order stays open until you manually cancel it or until your broker's system expires it (usually 30 to 90 days, depending on the broker).
- Good-till-date: The order expires on a date you choose, such as 30 days from now.
If you forget to cancel a GTC order and the stock price moves sharply, you might suddenly own shares you no longer want, or miss a sale you intended. Check your open orders regularly, especially if you set them weeks ago.
When a Limit Order Fills — and When It Does Not
A limit order fills only when the market price reaches or passes your limit. For a buy limit, the stock must fall to your price or lower. For a sell limit, the stock must rise to your price or higher. The order fills at your limit price or better — you might pay less than your limit on a buy, or receive more than your limit on a sell, if the price moves fast.
If the stock price never reaches your limit, the order expires unfilled. This is the main risk: you miss the trade entirely. You might set a buy limit at $50, the stock drops to $49.99 for one second, then rallies to $60, and you own nothing. Or you might set a sell limit at $75, the stock peaks at $74.95, then falls, and you never sell.
Some stocks trade in such low volume that the price might never hit your exact limit. A stock trading 100 shares a day might jump from $50.50 to $51.00 with no trades in between, skipping right over your $50.75 limit order.
Limit Orders vs. Market Orders: When to Use Each
| Order Type | How It Works | Best For | Main Risk |
|---|---|---|---|
| Market Order | Buys or sells immediately at the current market price | Stocks you want to own or sell right now; liquid stocks that trade often | You pay more than you expected (on a buy) or receive less (on a sell) if the price moves between when you click and when the order fills |
| Limit Order | Buys or sells only at your specified price or better | Stocks you want to own or sell, but only at a certain price; illiquid stocks where price swings are large | The order never fills if the price does not reach your limit |
Use a market order when you are certain you want the trade and the stock is liquid (trades often, with tight bid-ask spreads). Use a limit order when you have a specific price in mind and you can afford to wait — or walk away if the price never hits.
Partial Fills and Order Status
A limit order can fill in pieces. You might set a buy limit for 1,000 shares at $50, and the broker fills 300 shares at $50, then 200 more an hour later, then 500 more the next day. Each piece is a separate transaction, but they all count as one order. Your broker shows you the number of shares filled and the number still waiting.
Check your broker's order status page to see which orders are open, how many shares have filled, and how many are still pending. If you change your mind, you can cancel the unfilled portion at any time. Some brokers let you modify the price or quantity of an open limit order without canceling and resubmitting.
Frequently Asked Questions
Do I pay a commission for a limit order?
No. Most brokers charge the same commission (or no commission) for a limit order as they do for a market order. The order type does not affect the fee. Some brokers charge nothing for stock trades, period.
What is the difference between a limit order and a stop order?
A limit order sets the price at which you will buy or sell. A stop order (or stop-loss order) triggers a market order once the price falls to or below a certain level. Stop orders are used to protect against large losses; limit orders are used to control the exact price you pay or receive.
Can I set a limit order for a stock that is not trading right now?
Yes. You can place a limit order after hours or before the market opens. The order sits in the queue and waits for the market to open or for the price to hit your limit during the next trading session. Different brokers have different rules about when limit orders become active.
What happens if the stock gaps past my limit price?
Your order does not fill. If you set a buy limit at $50 and the stock opens at $52 the next morning, your order stays open (if it is a GTC order) or expires (if it is a day order). The stock never traded at $50, so there was no opportunity to fill your order.
Can I cancel a limit order after I place it?
Yes. You can cancel an open limit order at any time through your broker's website or app. Once canceled, the order is gone and will not fill. If part of the order has already filled, only the unfilled portion is canceled.