How Limit Orders Work When You Buy or Sell Stocks

A limit order lets you buy or sell a stock only at a price you choose or better

A limit order is an instruction to your broker to buy or sell a stock only if the price reaches a level you set in advance. If you place a limit order to buy Apple at $150, your broker will not buy it at $151 or $160 — only at $150 or lower. If you place a limit order to sell at $150, your broker will not sell it at $149 or $140 — only at $150 or higher. The order sits with your broker until the stock hits that price, the order expires, or you cancel it.

Limit orders are one of two main ways to enter a price when you trade. The other is a market order, which buys or sells immediately at whatever price the stock is trading at right now. A limit order gives you control over price but no may provide the trade will happen. A market order guarantees the trade happens but leaves the final price to the market.

Key Takeaways

• A limit order only executes if the stock reaches the price you set, so you control the price but not whether the trade happens at all.
• Buy limit orders execute at your price or lower; sell limit orders execute at your price or higher.
• Limit orders can expire at the end of the trading day, after 30 or 90 days, or when you cancel them — check your broker's default.
• If the stock never reaches your price, your order never fills and you own nothing.
• During fast market moves, a limit order can protect you from buying at a spike or selling in a dip, but it can also mean you miss a trade entirely.

How a buy limit order works

When you place a buy limit order, you tell your broker the highest price you will pay. Your broker watches the market and fills the order the moment the stock trades at that price or lower. If you set a buy limit at $100 for a stock currently trading at $105, the order waits. If the stock drops to $100, your order fills at $100 (or possibly lower if the stock keeps falling and your broker can get you a better price). If the stock never drops to $100 and instead rises to $110, your order never fills.

The main advantage is that you never overpay. The main risk is that you never buy at all. This matters most when you are trying to enter a position at a specific price and the stock is volatile. If you want to own a stock but only at a price that makes sense to you, a buy limit order enforces that discipline. If you are worried you will miss out on a stock that is rising, a buy limit order will force you to miss it — which is sometimes the right call and sometimes not.

How a sell limit order works

When you place a sell limit order, you tell your broker the lowest price you will accept. Your broker watches the market and fills the order the moment the stock trades at that price or higher. If you own a stock trading at $50 and set a sell limit at $60, the order waits. If the stock rises to $60, your order fills at $60 (or possibly higher). If the stock never reaches $60 and instead falls to $40, your order never fills and you still own the stock.

The advantage is that you never sell below your target price. The risk is that you never sell when you need to. Many investors use sell limit orders to lock in a profit at a specific level — for example, selling a stock if it rises 20 percent. The danger is that if the stock peaks at your limit price and then falls sharply, you may have missed your window. Your order might have filled at the peak, or it might have missed by seconds and left you holding a falling stock.

Time limits on orders and what happens when they expire

Every limit order has an expiration date. The most common options are a day order (expires at the end of the trading day if not filled), a good-till-canceled order or GTC (stays active until you cancel it or it expires after a set period), and orders set to expire after 30 or 90 days. Your broker sets a default — often day orders — so check your broker's settings before you place the order.

If your order expires without filling, it disappears. You own nothing and have no position. This is important to remember if you set a limit order and then forget about it. A day order for a stock that does not hit your price will vanish at market close. A GTC order can sit for weeks or months, which is useful if you are patient but risky if your reason for the limit price changes and you forget the order is still out there.

Limit orders versus market orders: when to use each

A market order buys or sells immediately at the current market price. You place it and it fills in seconds, usually at a price very close to what you saw on your screen. The trade is certain; the price is not. A limit order does the opposite — the price is certain, but the trade is not.

Use a market order when you are sure you want to own a stock and price is less important than speed. Use a limit order when you have a specific price in mind and you are willing to wait or walk away. In a fast-moving market, a limit order can save you from panic-buying at a peak or panic-selling in a crash. In a slow market, a limit order can mean you never buy or sell at all because the stock never touches your price.

Many investors use both. They might place a market order to buy a stock they are confident about, then use a sell limit order months later to exit at a profit target. Or they might use a buy limit order to add to a position only if the price drops to a level they think is fair.

Partial fills and what happens if only some of your order executes

If you place a limit order to buy 100 shares at $50 and the stock trades at $50, your broker may fill the entire order at once, or it may fill 30 shares at $50, then 40 more shares at $50.01, then the final 30 shares at $50.02. This is called a partial fill. You end up owning 100 shares, but at slightly different prices.

Partial fills are normal and happen because many buyers and sellers are in the market at the same time, and the broker matches them in the order they arrive. If you place a limit order and only part of it fills before the stock moves away from your price, the unfilled portion stays active (if your order is still valid) or expires. You can cancel the unfilled portion at any time.

Frequently Asked Questions

What happens if a stock gaps past my limit price?

If a stock opens at a price above or below your limit, your order may not fill at all. For example, if you set a buy limit at $100 and the stock opens at $105 due to overnight news, your order stays unfilled. Some brokers offer "gap fill" or "stop limit" orders to handle this, but the basic limit order does not protect you from gaps.

Can I change a limit order after I place it?

Yes. Most brokers let you cancel a limit order and place a new one with a different price or quantity. Canceling is instant and free. You cannot edit an order in place — you have to cancel and re-enter it. Make sure the original order is canceled before you place the new one, or you may end up with two active orders.

Do limit orders cost more than market orders?

No. Most brokers charge the same commission (or no commission) for limit and market orders. The cost difference, if any, is in the price you pay or receive — a limit order may cost you a better price if the stock moves away from your limit before it fills.

What is the difference between a limit order and a stop order?

A limit order sets a price at which you will buy or sell. A stop order (or stop-loss order) triggers a market order once the stock falls to a price you set. Stop orders are designed to protect against big losses; limit orders are designed to control the price you pay or receive.

Can I place a limit order after the market closes?

Yes, you can place a limit order anytime through your broker's app or website. However, it will not execute until the market opens the next day. If the stock gaps past your price at the open, your order may not fill. Some brokers offer after-hours trading, which lets limit orders execute outside normal market hours, but this is less common for individual investors.