An order to buy or sell a security or commodity at a pre-defined price (at most for a buy order or at least for a sell order, or better in either way). A broker will execute the order only subject to the limit price (price restrictions) set by the client (investor).

For example, a client posting a limit order to buy XYZ stock at 15 will not get his/ her order executed as long as the stock is trading above $15. The order will not even be executed if the stock has reached 15.01 level. However, once the stock price hits or drops below the limit, the order will be immediately filled. Likewise, for a client with a limit order to sell XYZ at 15, the order will not be filled unless the stock hits  or exceeds the $15 limit.

A limit order allows investors to set a maximum/ minimum price to buy/ sell a stock for—and hence the transacted price can be controlled as per an investor’s needs and expectations.