What is a limit order?

Limit order: An order to buy or sell only at a price you name yourself. It avoids ending up with a much worse price.

With a limit order you set a limit. When buying, that is the highest price you are willing to pay. When selling, it is the lowest price you are willing to accept.

With a market order you buy or sell straight away at whatever the price is at that moment. That is fast, but with a wide spread or fast moves the price can disappoint.

A limit order gives you more control over the price. The downside is that the order is not filled if the price never reaches your limit.

Example
A share trades at 20 euros. You place a limit order to buy 100 shares at no more than 19.50 euros. If the price drops to 19.50 euros, you buy for 1,950 euros. If the price stays above that, nothing happens.

Watch out
A limit order protects against a bad price, not against a loss afterwards. Also check how long the order stays valid.

Read more in the guide Buying your first stock: what happens behind the button.

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