If the ask price stays above the set purchase limit price, a buy limit order will not be executed. A purchase limit order protects investors during a moment of unanticipated market volatility. A market order favors the speed of selling over the security's price. If the price of your security declines significantly while you are waiting for it to be sold, you may lose money because you did not give yourself enough time to sell it at a reasonable price.
A sale limit order will not be executed if the last trade date is less than 60 days away. This prevents sales that have been planned but not yet executed from being reversed due to changing market conditions. For example, if the price of your security drops dramatically after it has already been reported by one or more news sources, other traders may use this information to enter the market and avoid the loss. By setting a minimum price, you can be sure that your order will be executed if the price goes up enough.
Some securities don't trade very often. When there is no trading activity for a long period of time, there is a risk that the security will drop in value before it is sold. To protect against this risk, some securities require an additional deposit (called the entry fee) before they will trade. The purpose of the entry fee is to reduce the risk to the seller without reducing the reward for those willing to take the risk.
A limit order allows an investor to sell or purchase a stock at a specific price. A purchase limit order is executed at or below the specified price. Your deal will only be completed if the market price of a stock hits or exceeds the maximum price. The order will not be executed if it never reaches that price. If this happens, you will not receive any payment for your order.
There are two types of limit orders: market and limit. With a market limit order, you are telling the market where you would like to sell (or buy) the stock at a specific price. This type of order can be placed with any quantity from a single share up to all available shares of a company's stock. As long as someone is willing to pay or accept delivery of shares at the requested price, your order will be filled immediately.
A limit order cannot be cancelled once it has been submitted to the market. This means that if you place a limit order at $100 and the stock drops to $90 after you submit your order, you will have to wait until it rises back above $100 before placing another limit order at $90.
The second type of limit order is called a stop loss order. Similar to a limit order, a stop loss order can only be placed with a specific quantity.
Tuesday, March 10, 2011. A limit order is a purchase or sale of a stock at a defined price or better. A purchase limit order can only be executed at or below the limit price, whereas a sell limit order may only be performed at or above the limit price. Limit orders are not guaranteed to be filled. If your limit order is not executed immediately, it will expire without being acted upon.
By definition, limit orders are orders that will not execute unless they reach or go beyond their defined price. This allows you time to think about whether you want to buy or sell at that price and gives you more control over your trade than if it were done automatically. Using limit orders also means that you do not pay for trading on margin. Trading on margin requires that you give your broker a certain amount of money as collateral to cover any losses that might occur during the trade. By using limit orders, there is no risk of losing more money than what you put into the trade.
People use limit orders all the time. For example, when you see a stock price drop below some support level (more on supports later), you may want to buy limit orders at that price to catch a dip in the market.
However, a limit order is not always carried out. Also, if the market moves against your position before it is executed, you will lose money.
There are several reasons why an order might not be executed. If a stock in your portfolio drops too far below its low price point on the trading screen, any existing orders at that price get cancelled. This could happen if the market has moved in favor of another stock and pushed yours down along with it. To avoid having your order cancelled, keep an eye on the price of your stocks daily. If one starts to drop lower than expected, have it re-evaluated by a broker.
Another reason may be that there is just not enough interest in your stock at the current time. Perhaps some other trader is willing to pay more for your stock than you were when you placed your order. In this case, your order won't be filled. Finally, you may want to consider whether or not your order is appropriate for a free-trade zone like NSE/NIFTY. These zones are designed to protect small investors by limiting the amount of stock any one person can buy in a given period.
If the ask price only trades at, but not below, the purchase limit level, the trader's order may or may not be filled. Because there may be more purchase orders than sell offers at that price level, all buy limit orders at that price will not be completed. 2:30 PM EDT 3/20/2007
The ask price is too high for any shares to be bought in an active market. If you want your order executed immediately, you'll have to place it with another brokerage firm.
Some traders prefer to place their orders with one broker and then cancel them if they don't want to actually trade yet can't get a better price from another broker. This allows them to control their risk by not paying for a full share if they think the price is likely to drop rather than rise. Of course, if the price does drop rather than rise, they lose money on their order.
This strategy is risky because if the second broker isn't willing to fill your order at a lower price, you won't know about it until after you've paid for a full share.
Even if your order isn't canceled by the time the market closes for the day, brokers need time to enter orders into their systems and match up buyers and sellers. If it's not fulfilled before the next trading session starts, you'll have to wait until then to see if your order was matched.