A limit order only buys at a price you specify or lower, or sells at a price you specify or higher. It gives you control over the price.
How It Works
Limit Buy: Buy this option only if the price falls to $2.50 or lower. Don't buy at $2.75 even if that's the current ask.
Limit Sell: Sell this option only if the price rises to $2.75 or higher. Don't sell at $2.50 even if that's the current bid.
Pros
- Better Fills: You control your price
- No Slippage: You never pay more than you're willing to
- Captures Spread: Sometimes the market moves into your limit price
Cons
- Might Not Fill: If the price never reaches your limit, your order sits unfilled
- Slow: Requires waiting for price to move to your level
- Partial Fills: Your order might partially fill if volume is limited
When to Use
- Entering trades (wait for better prices)
- Exiting trades (capture better exits)
- Most options trades (better fills than market orders)
Pro Tips
- Set limits within the bid-ask spread (reasonable price)
- Don't set limits too tight (unrealistic)
- Use Day orders for short-term
- Use GTC for longer-term limit orders
Related: Market Order, Stop Order, Order Types
