What is a limit order?

Question

Can somebody explain (simply) what a limit order is and how it works both for purchasing -AND- selling stocks.

Answer 1

Limit Order simply an order that you placed telling the broker that you only willing to buy or sell at that price you stated.

For a Buy Order means if the stock is currently at $2.00 and you place a limit order of $1.50, then the order will only be placed at $1.50 or less.

For a Sell order means if the stock is currenty at $2.00 and you only want to sell it at $2.10, then the order will only be placed when the Stock goes up to $2.10 or more

Hope this helps

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Answer 2

Limit order has two parts, one is 'stop loss' and the other 'cover'. Suppose you give a short sale order to your broker. If you are not sure very much which side the stock is moving you can give a 'stop loss' order if the stock moves up to some specified price. If the stock moves down to some specified price you can order 'cover'.
If you are buying stock you can either give a market order meaning buy the stock at marke price or limit order asking the broker to buy only below certain price or at some price specified by you. In this case there is no cover but this sort of orders are called 'limit orders'.