What is Limit Order? How to Place Buy and Sell Limit Orders
A limit order is an instruction to buy or sell a stock at a specific price or better. Unlike a market order which executes immediately at any available price, a limit order only executes when the stock reaches the price you have set. You control the price, but there is no guarantee the order will be filled.
If you are shopping for a phone and say 'I will buy this phone only if it falls to Rs.15,000 or below,' that is a limit order. You might get the deal if the price drops. Or you might not get it at all if the price stays above Rs.15,000. The control is yours, but so is the risk of missing the opportunity.
How does a limit order work?
- Buy limit order. You set the maximum price you are willing to pay. If you place a buy limit order for TCS at Rs.3,800, it will only execute if TCS is available at Rs.3,800 or lower. If TCS is trading at Rs.3,850, your order sits in the order book and waits.
- Sell limit order. You set the minimum price you are willing to accept. If you place a sell limit order for TCS at Rs.4,000, it will only execute if a buyer is willing to pay Rs.4,000 or more. If the current price is Rs.3,850, your order waits until the price reaches your level.
When is a limit order the right choice?
| Use Limit Order When | Use Market Order Instead When |
|---|---|
| You have a specific target price in mind | You need to exit a position urgently |
| The stock is illiquid with wide bid-ask spread | The stock is highly liquid with tight spreads |
| You are not in a hurry to execute | Speed matters more than price |
| You want to avoid slippage | You cannot risk the order not filling at all |
What are the risks of using limit orders?
The biggest risk is that your order may never get executed. If you set a buy limit at Rs.3,800 and TCS never falls below Rs.3,820, you miss the entire move upward. Some investors miss great investments because they wait for a price that never comes.
Another risk is partial fills. If you want to buy 500 shares at Rs.3,800 but only 200 shares are available at that price, you get a partial fill of 200 and the remaining 300 stays pending. This can be inconvenient if you need a full position.
Place buy and sell limit orders through Stockk at stockk.trade/products/equity.
Investments in securities market are subject to market risks. This article is for educational purposes only.
Frequently Asked Questions
I placed a limit order at Rs.500 but the stock is at Rs.510. Will my order execute?
A buy limit order at Rs.500 will only execute if the stock falls to Rs.500 or below. While the stock is at Rs.510, your order remains pending in the order book. If the stock never reaches Rs.500 during the trading session, the order expires unfilled at the end of the day unless you set it as a Good Till Cancelled order.
Can I change the price of a limit order after placing it?
Yes. Most broker platforms allow you to modify your limit price while the order is pending. You can increase or decrease the price, change the quantity, or cancel the order entirely. Modifications are processed instantly as long as the original order has not been executed.
What happens to my unexecuted limit order at the end of the day?
By default, limit orders in India are day orders, meaning they expire if not executed by the end of the trading session at 3:30 PM. The order is automatically cancelled and no shares are bought or sold. You would need to place a fresh order the next trading day if you still want to proceed.
Is there a fee for placing a limit order that does not execute?
No. Brokerage charges apply only when a trade is actually executed. If your limit order sits in the order book all day and never gets filled, there is no charge. You only pay brokerage, STT, and other charges on completed trades.
Can I place a limit order during the pre-open session?
Yes. You can place limit orders during the pre-open session from 9:00 AM to 9:08 AM. These orders participate in the call auction that determines the opening price. If your limit price is at or above the equilibrium opening price for a buy order, it may get executed at the opening itself.
Investments in securities market are subject to market risks. This article is for educational purposes only and does not constitute investment advice.
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