Limit Order
An order to buy or sell at a specified price or better — it may not fill at all.
Also called: limit buy · limit sell
Written by Javier Sánchez Ros
In plain language
A limit order sets your worst acceptable price. A buy limit fills at your price or lower; a sell limit fills at your price or higher.
The tradeoff is the mirror image of a market order: you control price completely and execution not at all. If the market never trades at your level, nothing happens.
Resting limit orders are what make up the order book. When you place one away from the market, you become the liquidity someone else trades against.
Worked through
Planning a 60-cent stop, then chasing the entry by 20 cents
- Planned entry
- $44.00
- Stop
- $43.40
- Actual entry after chasing
- $44.20
- Real stop distance
- $0.80, not $0.60
The position was sized for a 60-cent stop. Entering 20 cents higher without moving the stop makes the real distance 80 cents — a third more risk than the number the size was calculated from, on a position that was never resized.
A limit order at $44.00 prevents this by construction. Either the price comes to you and the trade is the one you planned, or it does not and you take nothing. The cost is the trades you miss; the benefit is that every trade you do take has the risk you intended.
Chasing feels like the smaller error because 20 cents is a small number. It is not: risk is measured against the stop distance, and a 20-cent slip on a 60-cent stop is a 33% overrun. Do it habitually and a 1% rule quietly becomes a 1.3% rule.
The honest trade-off is missed opportunity. A limit that never fills on a setup that then works is genuinely annoying, and it is still cheaper than a book full of positions whose real risk nobody recalculated.
Why it matters
Limit orders let you plan an entry precisely, which keeps your actual stop distance — and therefore your position size — matching the trade you calculated.
Common mistakes
- Setting a limit so far from the market that a good trade is missed for a penny.
- Assuming a limit order guarantees a fill when price touches it. You are in a queue.
- Forgetting resting limit orders exist until they fill unexpectedly days later.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
An instruction to buy or sell immediately at the best price currently available.
The live list of all resting buy and sell orders at each price level.
The instruction that says how long an order stays active before it expires.
The price at which you open a position.
A stop order that becomes a limit order instead of a market order when triggered.