Glossary · UK
What is Limit Order?
An instruction to buy or sell an investment only at a specified price or better, as opposed to a market order, which executes immediately at the best available price.
Full Definition
A limit order is an instruction given to a broker or trading platform to buy or sell a share, fund or other tradeable investment only at a specified price or better -- a maximum price for a buy order, or a minimum price for a sell order -- rather than executing straight away at whatever the current market price happens to be. This contrasts with a market order, which is executed immediately at the best price currently available, guaranteeing the trade happens but not the exact price achieved, which can matter for less frequently traded investments or during periods of high volatility when prices can move quickly between the moment an order is placed and the moment it would otherwise execute. A limit order gives the investor control over price but not over whether or when the trade actually happens: if the market price never reaches the specified limit, the order simply remains unfilled (subject to whatever expiry the investor or platform sets, from a single trading day up to "good till cancelled"), and even if the price does briefly touch the limit, there is no guarantee the order is filled if demand at that price from other investors is high relative to available supply. Because of this trade-off between price certainty and execution certainty, limit orders are more commonly used by active investors trading individual shares at a specific target price, or when trading in less liquid investments where the bid-offer spread can be wide, than by long-term investors making regular contributions into a diversified fund, who typically just want the trade to complete promptly and are less focused on securing an exact entry or exit price.