A limit order is an order to buy or sell a security at a specified price or better.

• For a buy limit order, the order will only execute at the limit price or lower.
• For a sell limit order, the order will execute only at the limit price or higher.

A limit order allows an investor to control the price at which they buy or sell but does not guarantee that the order will be filled if the market price does not reach the specified limit. It is commonly used when an investor wants to ensure a better price than the current market price and is not in a rush to execute the trade immediately. For example:

• If a stock is currently trading at $50 and you want to buy it only if the price drops to $48, you place a buy limit order at $48.
• If you own a stock at $50 and want to sell if it reaches $55, you place a sell limit order at $55.

The order will execute only if the market price hits or beats your specified limit price. Sometimes, the order might fill at a better price than the limit. However, there is no guarantee the order will be filled if the market never reaches your limit price.