A limit order is an instruction to buy or sell a security only at a specific price or better. Unlike market orders that execute immediately at whatever price is available, limit orders wait until the market reaches your target price. You control the price, but there’s no guarantee you’ll get filled if the price doesn’t reach your limit.
- Executes only at your specified price or better
- Guarantees price but not execution
- Best for precise entries and illiquid stocks
How Limit Orders Work
Limit orders wait in the order book until a matching order appears:
Buy Limit Order at ₹98:
- If current price is ₹100, order waits
- When price drops to ₹98, order fills
- You get ₹98 or better (possibly ₹97.50)
Sell Limit Order at ₹105:
- If current price is ₹100, order waits
- When price rises to ₹105, order fills
- You get ₹105 or better (possibly ₹105.50)
If price never reaches your limit = no fill
Quick Reference: Limit Order Types
| Order Type | Price Behavior | Fills At |
|---|---|---|
| Buy Limit | Below current price | Limit price or lower |
| Sell Limit | Above current price | Limit price or higher |
| Buy Limit (at market) | At current ask | Immediately at ask |
| Sell Limit (at market) | At current bid | Immediately at bid |
Example: Using Limit Orders
Scenario: Buying INFY
- Current price: ₹1,520
- Support level: ₹1,480
- You want to buy on pullback
Market Order Approach:
- Buy now at ₹1,520
- No patience premium
Limit Order Approach:
- Place buy limit at ₹1,485
- Wait for pullback
- Either: Price reaches ₹1,485 → fill → better entry
- Or: Price never reaches → no fill → miss the trade
Trade-off: Better price if filled, but risk missing the move entirely.
A limit order executes only at your specified price or better. It guarantees your price but not that you’ll get filled. Use limit orders when price precision matters and you’re willing to miss the trade if it doesn’t come to your price.
When to Use Limit Orders
Use Limit Orders When:
- Trading illiquid stocks (avoid slippage)
- Entering positions (not urgent)
- Price precision matters for your setup
- Buying on support / selling on resistance
- Order size is large relative to volume
Consider Market Orders Instead When:
- Exiting positions at stop loss (must get out)
- Trading very liquid stocks (minimal spread)
- Speed is critical
- You can’t afford to miss the trade
Limit Order Strategies
1. Buy at Support
Place buy limit orders at key support levels. If price pulls back, you get filled at optimal entry.
2. Sell at Resistance
Place sell limits at resistance levels to take profits when price reaches your target.
3. Layered Limits
Place multiple limit orders at different prices to average into a position as price moves.
4. Good-Till-Cancelled (GTC)
Leave limit orders active for days or weeks to catch specific prices during volatile markets.
The Risk of Limit Orders
Scenario: Stop Loss as Limit Order
- You own stock at ₹100
- Set stop-limit to sell at ₹90
- Stock gaps down overnight to ₹80
- Your limit at ₹90 doesn’t fill (price never reached ₹90)
- Stock continues to ₹60
- Your limit order saved you nothing
Lesson: For stop losses, market orders (or stop-market orders) are safer. Limit orders for entries; market orders for emergency exits.
Common Mistakes
-
Using limit orders for stop losses – In a fast crash, your limit might not fill and you ride the loss down.
-
Limit too far from market – Placing a buy limit 10% below current price means rarely getting filled.
-
Forgetting open orders – Old limit orders can fill unexpectedly. Review and cancel stale orders.
-
Chasing with limits – Raising your buy limit because you keep missing fills defeats the purpose.
How JournalPlus Tracks Limit Orders
JournalPlus logs whether you used limit or market orders, tracks fill rates, and shows how much you saved (or lost) by using limit orders versus the price at the time of order submission.
