Limit Orders Limit orders are stock orders that allow you t...

Limit Orders

Limit orders are stock orders that allow you to buy (or sell) shares of stock at a pre-designated price OR better.

Example: So let’s say we want to buy 10 shares of Microsoft (MSFT) stock, which is currently trading at a last of $123.37 per share, but we only want to pay $123.00 or less for our shares. What we can do is fill out a trade ticket for a buy limit order at $137.00, which basically says, “Hey, I know Microsoft is trading above $123 per share right now, but if the price comes down to $123 or lower, automatically buy me in please”. This same concept applies for using limit orders to sell shares of stock.

When you place your limit order, you can set the duration to have the order expire at the end of the day, end of the week, end of the month, or a year later. Also, the order is automatic, so you do not need to be present when the order takes place. Your online broker will fill it for you automatically and send you the confirmation notice.

Tip for success: Limit orders provide seasoned traders a lot of control over their trading, because they dictate price. Using limit orders is how you are able to place trades during pre- and post-market hours. You cannot use market orders during after hours trading.