When you buy or sell a stock, you have the option to select a price limits at which you want your trade to be executed. This is known as a limit order. It is different from a market order, which can be either a buy or a sell at the current market price. Limit orders give you precision, control and security against volatile market conditions. However, they also come with the risk that your trade may not execute if the market doesn’t match your limit price.

For example, say you own shares of Widget Co and you want to sell them when they reach $15 per share. You can place a sell limit order with your broker at that level. If the stock reaches $15, your order will be executed and you will have sold your shares. But, if the company announces that it is releasing a new product and its share price skyrockets to $210, your shares could miss the mark and you will lose money on the sale.

Top Limit Order Calculators: Features and Benefits

With a buy or sell limit order, you can set the maximum price you want to pay (with a buy limit) or the minimum price you will accept (with a sell limit). You can use technical tools such as support and resistance levels or moving averages to help you choose a realistic price level for your trades. You should also consider transaction costs when choosing a limit price for an order.