A limit order is an order placed with a broker to buy or sell a security at a specified price or better. A buy limit order is only executed at the limit price or lower, and a sell limit order is executed at the limit price or higher. A limit order may not get filled if the price does not reach the limit price. For example, a trader wants to buy a stock, but is not willing to pay more than $20. He goes ahead and places a limit order to buy the stock at $20. By entering a limit order, the trader will not buy the stock at a higher price, but will carry the risk of getting fewer shares than he wants or not getting the stock at all. Limit orders are especially useful in low-volume or high volatile markets.
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