A limit order (LMT)

The following is an example which is for International Business Machine stock (ticker: IBM), whose price is $29.

There are two types of limit orders:

Type 1- This order is where a buy or sell order is executed at a predetermined price; a very accurate method of order.

• Buy orders of this type are executed when the prize reaches the determined price, the broker will not wait for the price to drop even further.
• The sell orders of this type are mostly given to sell for determined price, the broker will not wait for the price to increase further.

Example 1: Samuel places a buy order for 1,000 shares of IBM where the limit is $29.50.

This denotes that Samuel is ready to purchase one for $29.50 or less.

If the stock price gets over $29.60, this order is not executed and the order is killed.

Example 2: Samuel places a sell order for 1,000 shares of IBM where the limit is $28.50.

This denotes that Samuel is prepared to sell his share for $28.50 and nothing less. He will sell for more, but nothing less than $28.50.