A limit order (LMT)

Buying for less than the predetermined price and selling for more than the predetermined price.

• Buy orders are mostly less than the current price, because the buyer is trying to buy shares cheaply.
• Sell orders are mostly more than the current price, because the seller is trying to sell his shares at a higher price.

Example 1: Samuel places a buy order: “Buy 1,000 shares of IBM for me, only when the price falls below $28 or lower”.

The order is documented in the order book. When the stock’s price drops below $28 or less, the trade will be executed.

Example 2: Samuel places an order: “Sell 1,000 shares of IBM, only when the price goes above $31″.

The order will be executed when the stock exceeds that price.

Note: Limits orders can be placed for the time frames of hours, days, week and even months.

If the trade is not executed on the first day, then it is automatically transferred to the next trading day, and this is followed until the expiry date mentioned in the order.