A limit order is an instruction issued by an investor to a broker to only buy or sell shares at a particular price threshold. For example, Joan might want to buy stock in Smith Computers, but only at $20 a share or cheaper. She can place a buy limit order with her broker to begin buying shares only when the price dips to $20 or lower. Similarly, limit order can be used to to sell stock. If Joan wants to start selling her shares at $35 or higher, she can place a sell limit order to do so.
Limit orders can be set for a particular period of time, such as until the end of the trading day, or “good till canceled” (GTC), meaning that the order will remain in effect until the investor cancels it. In addition to price, additional conditions can be placed on the limit order that determine how the stock is purchased or sold. For instance, an all or none order requires that a required number of shares must be bought or sold at the same time.
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