A limit order is an order to buy or sell a set number of shares at a specified price or better. A limit order guarantees price, but not an execution. These types of orders also may be placed with special instructions, like AON (all or none) and GTC (good 'til canceled).
Buy Limit Orders - Orders will execute only if the market reaches the specified price or lower for a long enough period of time to execute the order.
Sell Limit Orders - Orders will execute only if the market reaches the specified price or higher for a long enough period of time to execute the order.
For NYSE and NASDAQ Stocks and all OTC securities:
Limit prices may include up to two decimal places for stocks above $1.00.
Limit prices may include up to four decimal places for stocks under $1.00.
As we go through how to place a limit order, we will skip over the details that are similar to a market order and focus on the differences. If you would like to review market orders, please see the previous article.
For this example, we will sell 10 shares of fictional company XYZ only if the price of XYZ reaches $35. The current price for XYZ is $33.65.
1. Click on the Trade tab to begin.
2. Using the drop-down menu next to Buy/Sell, select Sell.
3. Next, enter the number of shares and symbol (just like you did for the market order). limit_order1.png
4. From the Order Type drop-down menu, select Limit. As soon as you select Limit, the Limit Price field will automatically display. In this example, we have decided we want to sell our shares of XYZ if the price of XYZ goes up to $35 dollars, so we enter 35 as our limit price. As a reminder, with any limit order, only the per share price goes in the limit price box, not the value of the entire trade. limit_order2.png
5. We are not confident that XYZ will reach $35 today, so we have extended the duration from a Day order into a Good 'til Canceled order, better known as a GTC. This order will be sent to a market center where they will properly handle your limit order until it is available to be matched with a buyer at your price of $35 or better.
Because you have used a GTC duration this order will be left open (available to be matched with a buyer) until you decide to cancel this order or it expires. GTC orders expire on the last business day of the month following the month in which it was placed. So if we enter this order on March 15 and XYZ never reaches your limit price of $35, the order will expire on the last business day of April. limit_order3.png
6. You are now ready to click the Review Order button and place your trade.
Watch Trading and Account Management in the Trading Website to see a demonstration of how to place a stock order and complete other tasks in the Scottrade Trading Website. To learn more about using different order types to enhance your trading, watch the Understanding Basic and Advanced Orders event recording.