A limit order is an order to buy or sell a security at or better than a specified price (a "limit price"). This means that you decide the price on which you want your order to be executed and there are two types of limit orders: buy and sell.
A buy limit order can be executed only at or below the limit price you entered. If an investor wants to buy a stock at $10, a buy limit order can be placed, and the order will only be executed if the stock trades at $10 or lower. However, if the stock never reaches the price of $10, you may lose an opportunity to buy.
The same is true for a sell limit order. If an investor would like to sell a stock for $10, a sell limit order can be placed, and the order will only be executed if the stock trades at $10 or higher; but there is a chance the order may not be executed in case the stock never reaches the $10 price limit.
It's important to keep in mind that you can't completely eliminate market and investment risks. You can't predict when periods of market volatility will hit, so it is often best to decide what is most important to you based on your investment goals and objectives, whether it be price or making a trade at a specified time. In general, understanding order types can help you prioritize your needs, manage risk, speed execution and provide price improvement. For all of your securities transactions, check the trade confirmation you receive from your firm to make sure the price, fees and order information is accurate. For more information access: https://www.finra.org/investors/alerts/understanding-order-types-can-save-time-and-money.
Keep in mind that all orders are not handled the same way by your financial firm. Ask about your firm’s procedures for handling the execution of securities transactions and different order types, particularly during volatile market conditions. Market orders typically receive the highest priority, followed by limit orders.