Limit order is an order instruction to buy or sell an asset at a specified price or better. A buy limit order can only execute at the limit price or lower, while a sell limit order can only execute at the limit price or higher. A limit order guarantees only the price boundary if it executes; it does not guarantee execution.
How it works
The limit order is placed into the exchange order book as passive resting liquidity, waiting for incoming market orders to match against it.
Many markets use price-time priority, while some venues/products use pro-rata or hybrid allocation rules.
Why it matters
Limit orders eliminate negative slippage and protect traders from overpaying during volatile momentum swings.
Limit orders can leave a trader stranded if the market misses the limit level by a fraction of a cent before trending strongly away.
A simple market example
A trader places a limit buy order for 100 shares of an index ETF at $400.00 when the price is $405.00. The order rests visibly in the book. If price declines to $399.80, the order fills at either $400.00 or the improved price of $399.80.
Common mistakes
Placing limit orders directly on crowded psychological round numbers (like $50.00 or $100.00), resulting in long queue delays.
Believing that because a candlestick wick touched your limit price, your order was guaranteed to execute.
Frequently asked questions
Can a limit order fill at a worse price than specified?
No. Exchange matching rules strictly prohibit limit orders from filling at any price worse than the limit.
What is a partial fill on a limit order?
A partial fill occurs when available opposite liquidity at your limit price is insufficient to cover your entire order size, leaving the remainder active in the queue.
What is the difference between Day limit orders and GTC limit orders?
A Day limit order expires automatically at the close of the trading day. A Good-Til-Canceled (GTC) order remains active in the book across multiple sessions until filled or manually canceled.
Educational content only. Definitions describe common market usage and may vary by jurisdiction, instrument, or institution.