What is a Limit order?
A Limit order is an order price condition used to buy/sell a stock with a restriction on the price, i.e., the maximum price to be paid/ the minimum price to be received.
The order is executed only at the specified limit price, or better. So, a buy limit order will only be executed at the specified limit price or lower, and a sell limit order will only be executed at the specified limit price or higher.
To understand limit orders better, let us assume the current market price of L&T to be Rs. 1,000.
Look at the following scenarios where the limit price is set above and below the current market price:
| Order Type | Limit Price | Execution Price | Remarks |
|---|---|---|---|
| BUY | Rs. 1,100 (above the current market price) | Rs. 1,000 | Given that the condition of a limit order is to execute an order at the specified price or better, your order will be executed at the current market price of Rs. 1,000 |
| BUY | Rs. 900 (below the current market price) | Rs. 900 | Given that the condition of a limit order is to execute an order at the specified price of better, your order will only be executed when the price reaches Rs. 900, or lower. |
| SELL | Rs. 1,100 (above the current market price) | Rs. 1,100 | Given that the condition of a limit order is to execute an order at the specified price or better, your order will only be executed when the price reaches Rs. 1,100, or higher. |
| SELL | Rs. 900 (below the current market price) | Rs. 1,000 | Given that the condition of a limit order is to execute an order at the specified price or better, your order will be executed at the current market price of Rs. 1,000. |
While limit orders are not guaranteed execution, they help investors ensure that they do not pay more than a pre-determined price for a stock.
To place a Limit order on SELFIE / TraderX:
Select the Price Condition as LIMIT in the order placement window
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