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Limit Order
Term category: Stocks, General Investing
In 10 words or less: An order that specifies a price you'd like to buy or sell a stock for.

Definition: A stock order placed with a broker in which you specify what price you want to pay for a stock. If a stock was trading at $60 and you placed a limit order for $55, you are essentially telling the broker "I want to pay $55 or less per share for this stock." If the stock drops to that level, you will buy the stock. If it doesn't, you won't.

StockJargon Advice: Limit orders are preferred by most investors because they allow you to determine what price you will pay.

The reason I recommend limit orders is because if you place an order after the market is closed, it'll be executed the next morning. Sometimes a stock will open at a price significantly different from the previous day's close. A stock may close at $45 one day but open at $50 the next day. Limit orders prevent you from paying more than you expected.

Unfortunately, they usually cost a few extra dollars per trade.

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