Limit Order is a type of trade order used by investors to buy or sell a security at a specific price or better. It allows traders to control the execution price, helping them avoid unfavorable market fluctuations. A limit order to buy executes only at or below the specified price, while a limit order to sell executes only at or above the set price. This approach gives investors greater control over entry and exit levels in volatile markets.

Unlike a market order, which executes instantly at the current market price, a limit order remains pending until the market reaches the desired price. This makes it ideal for investors who prioritize price over immediate execution. However, thereís a possibility that the order may never get executed if the market doesnít reach the limit price. For example, if you place a buy limit order for a stock at ?950 and the stock only drops to ?955 before rising again, your order will remain unfilled.

Limit orders are particularly useful during periods of high volatility, earnings announcements, or low liquidity conditions. They are commonly used by traders following technical levels or by long-term investors seeking specific entry points. In intraday trading, limit orders can also help minimize slippage and manage risk effectively.

While limit orders offer precision and control, investors must regularly review their open orders. Market conditions can change quickly, and an unmonitored limit order might execute at an undesired time if the market suddenly moves. Therefore, using limit orders with proper analysis and awareness of support and resistance levels can significantly enhance trading discipline and efficiency.

In summary, a limit order is a strategic tool that enables disciplined investing, ensuring traders donít overpay or undersell while navigating unpredictable market movements.