A limit order is a type of order placed by an investor on a stock exchange, such as the London Stock Exchange, to buy or sell a stock at a specific price or better. It is an order to buy or sell a stock at a specified price or better, but not to buy or sell at a higher price (for a buy limit order) or at a lower price (for a sell limit order).
When an investor places a limit order to buy a stock, the order will only be executed if the stock reaches or falls to the specified limit price or lower. Similarly, when an investor places a limit order to sell a stock, the order will only be executed if the stock reaches or rises to the specified limit price or higher. This allows the investor to set a specific price at which they are willing to buy or sell the stock, and to ensure that they don’t pay too much or receive too little.
For example, if an investor places a buy limit order at £50 for a stock that is currently trading at £55, the order will only be filled if the stock falls to £50 or lower. Similarly, if an investor places a sell limit order at £50 for a stock that is currently trading at £45, the order will only be filled if the stock rises to £50 or higher.
Limit orders are useful for investors who want to buy or sell a stock at a specific price and who are not in a rush to execute the trade. They can also be used as a way to protect an investor from buying high or selling low by setting a specific price at which they are willing to buy or sell.
However, it’s worth noting that limit orders do not guarantee that the order will be filled. If the stock never reaches the specified limit price, the order will not be executed. Additionally, it’s worth noting that limit orders do not guarantee that the order will be filled at the specified price, because of the spread, which is the difference between the bid price and the ask price, orders can be executed only at a certain level above or below the limit price.
Limit orders are a way for investors to buy or sell stocks on the London Stock Exchange at a specific price or better, it allows them to set a specific price at which they are willing to buy or sell and to ensure that they don’t pay too much or receive too little. They are useful for investors who want to buy or sell a stock at a specific price and who are not in a rush to execute the trade. However, limit orders do not guarantee that the order will be filled and investors should take into account the market conditions and the spread when using limit orders.
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