What is a limit order in trading?
Understanding Limit Orders in Trading
What is a Limit Order?
A limit order is a type of order that allows traders to specify the maximum price they are willing to pay for a purchase or the minimum price at which they are ready to sell. Unlike market orders, which execute immediately at the current market price, limit orders provide investors with greater control over their trades.
Advantages of Limit Orders
Limit orders help to manage risk and improve trading strategy. Here’s a quick overview:
| Advantages | Description |
|---|---|
| Price Control | Specifies the exact price for trading. |
| Risk Management | Prevents buying/selling at unfavorable prices. |
In summary, limit orders offer traders an effective way to control their entry and exit points while reducing potential losses.
