Limit orders are the second easiest thing to understand when it comes to investing. Market orders are the first.
Plainly put, Limit orders are prices that you want to pay for an instrument.
Let’s say you head to a store and after trying on different jeans you found the pair that fits. But when you look at the price you think to yourself, I can get it at a better rate. So instead of paying the Market price, you bargain with the seller.
Let’s say the price is $100 but you are dead set to pay $90. So you tell the seller, this is the price I am going to pay, take it or leave it.
Sometimes you will get the price that you want almost right away (you are filled right away on your order), sometimes the seller tells you to f*** yourself (you never get filled), and other times you might get a call a few days later saying let’s go for it (patience is king and you get filled a little later).
This is a limit order. You tell your broker what you WANT to pay for the stock. Getting filled on your request, well that’s something you’ll have to find out for yourself.
Marina 'The Trader Chick' Villatoro