What is a limit order?
A limit order is an order with a set price for the sale or purchase of stock. The order will only be fulfilled if the stock reaches or exceeds the set price.
They can be used to keep a tight rein on a strategy and ensure you do not buy too high or sell too low.
Where have you heard about limit orders?
Similar to market orders, these are the bread and butter of trading securities and one of the first actions an investor will learn when trading.
What you need to know about limit orders...
Using limit orders allows investors to protect themselves from buying a security at too high a price and selling it at too low a price. They don't protect you from losses.
While a limit order guarantees price, it doesn't guarantee that the order will be executed for example, there may not be enough liquidity available, or the limit price might not be available long enough for the order to be filled. This could mean missed opportunities if the price shifts away from the limit before it's executed.