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    Posted by Shane McQuillan 22 Feb 2019

    Limit Order: A Few Things You Have to Know

    In trading stocks, you will generally have two options – to place a market order or limit order. Before deciding with regards to which one should be chosen, it is important to be aware of the strengths and weaknesses of each option. In addition, you should also be familiar with how it will affect your trading strategy. In the rest of this post, we will provide you with some valuable insights that you must know about a limit order.

    What is a Limit Order?

    Simply put, this is an order to buy or sell at a price that has been previously specified or even better, It is a take-profit order that will be placed in a brokerage or bank. One of the conditions is that it should not be executed in case the price specified by the investor is not satisfied during the duration by which the order is open. In addition, in the case of a limit order, an investor can be able to restrict the duration for the order to be good until canceled..

    More so, in knowing what is a limit order, you should be familiar with the risks that are involved. While there is a sort of control on execution price, for aggressive trading techniques, this may prove to be ineffective. In some instances, there are also risks that the order may possibly be not executed at all.

    What is Trailing Limit?

    This refers to the direct submission of an order to the exchange at a price with a fixed distance from the market. There are two types of trailing limit. You can opt to buy, wherein the price is set below the market price. On the other hand, if you opt to sell, the price is above the market price.

    Buy on Limit or Sell on Limit?

    Buy on limit is a strategy that is done for entering a market. In this case, the investor is on the buying side, purchasing at a specific price point that is believed to be beneficial. It means that if the order will be filled, it is going to be filled at a pre-determined price. However, there are instances wherein the order may end up not being filled at all. On the other hand, to sell on limit means that there is a limit on the price of the share before it is going to be sold. If this price is not met, the share will be held and will not be sold until the minimum has been reached.

    Limit orders may seem to be too technical, but if you take time getting to know what they are and how to use them, it will be easier to understand the impact will it have in your trading strategies.