What is a limit order? Limit vs market vs stop orders

A limit order is an instruction to buy or sell an asset at a specific price or better. A buy limit executes at your limit price or lower, and a sell limit executes at your limit price or higher.

The order waits in the order book until the market reaches your price. If it never does, the order stays unfilled until you cancel it or it expires, for example at the end of the day.

A market order buys or sells right now at the best available price. It almost always fills, but the price can differ from what you saw, especially in a fast or thinly traded market. This difference is called slippage.

A stop order stays dormant until the price reaches a trigger level, then becomes a market order. It is mostly used to limit losses. A stop-limit order becomes a limit order at the trigger, which protects the price but may not fill.

In short, a market order prioritises speed, a limit order prioritises price, and a stop order reacts to a price move.

Limit orders suit buying a dip at support, selling into resistance, or trading assets with wide spreads. Because resting orders add liquidity, many exchanges also charge lower fees for them.

Buy limit: fills at limit price or lower
Sell limit: fills at limit price or higher
Example: price 52, buy limit 50 → no fill until price ≤ 50

Say a stock trades at 52 and you want it at 50. A buy limit at 50 fills only if the price falls there:

The main drawback is missing the trade. If the price touches your level briefly, or moves away without reaching it, you may be left out. A partial fill is also possible when there is not enough volume at your price.

A limit order does not protect you from a falling market the way a stop does. Many traders combine both: a limit order to enter, and a stop order to exit if the trade goes wrong.