Limit Order¶
OVERVIEW¶
A limit order is a buy or sell instruction that executes only at your specified price or better — never worse. It guarantees price but not execution: if the market never reaches your limit price, the order expires unfilled.
| Order Side | Execution Condition | Example |
|---|---|---|
| Buy limit | Fills at limit price or below | Buy limit $150 → fills at ≤ $150 |
| Sell limit | Fills at limit price or above | Sell limit $150 → fills at ≥ $150 |
Limit vs. Market
A market order fills immediately at whatever price is available. A limit order waits for your price. You trade execution certainty for price certainty.
HOW IT WORKS¶
A limit order rests in the exchange order book until one of three events occurs:
- The market reaches your limit price and sufficient contra-side liquidity exists to fill it
- You cancel the order manually
- The order's time-in-force expires
Price-time priority governs queue position: at any given price level, earlier orders fill before later ones. A buy limit of 100 shares at $150.00 placed at 09:30:01 fills ahead of an identical order placed at 09:30:02.
Core execution rule:
| Side | Condition for immediate fill |
|---|---|
| Buy limit | Limit price ≥ current ask → order crosses spread, fills immediately (capped at limit) |
| Buy limit | Limit price < current ask → order rests in book |
| Sell limit | Limit price ≤ current bid → order crosses spread, fills immediately (capped at limit) |
| Sell limit | Limit price > current bid → order rests in book |
Price Improvement
If the market gaps through your limit price, you fill at the better price — not your limit. A buy limit at $480 fills at $475 if the stock opens there.
COMMON USE CASES¶
| Use Case | How Limit Orders Help |
|---|---|
| Entering at technical levels | Place buys at support, moving averages, or Fibonacci zones |
| Selling into resistance | Set sell limits at prior highs or overhead supply |
| Illiquid / thin stocks | Avoid slippage from wide market order fills |
| Options trading | Manage wide bid-ask spreads on every retail fill |
| Liquidity provision | Post-only limit orders earn maker rebates on supported venues |
WORKED EXAMPLE¶
NVDA is quoted $485.20 bid × $485.35 ask. You target a $480 entry.
Order submitted: BUY 100 NVDA LIMIT 480.00 DAY
| Scenario | Outcome |
|---|---|
| NVDA trades down, ask hits $480 | Order fills at $480 or better |
| NVDA rallies, never touches $480 | Order expires unfilled at 4:00 PM ET |
| NVDA gaps down to $475 at open | Order fills at $475 (price improvement) |
| Market order placed instead | Pays $485.35 immediately — $535 more on 100 shares |
LIMITATIONS AND MISCONCEPTIONS¶
Non-Execution Risk
Limit orders that never fill mean you missed the move entirely. Prices set too far from market often go unfilled as stocks rally without triggering entry.
Limit Orders Are Not Stop-Losses
A sell limit placed above the current price is a profit target. Downside protection requires a stop-loss order or stop-limit order — not a sell limit.
| Misconception | Reality |
|---|---|
| Limit orders always fill at your exact price | Partial fills are common — 1,000 shares may fill as 300 with the remainder still working |
| Price-time priority always protects you | In fast markets, iceberg orders and HFT queue-jumpers may fill at your level ahead of you |
| Your limit price is guaranteed in volatile opens | A stock can trade through your level without filling every resting order at that price |