| Guide to Online Investing |
Using Limit Orders |
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The limit order is very important in volatile markets. It is different from market order, since a limit order is set to be executed at a certain price. When placing a market order, the broker will either buy or sell the security at the best available price. However, in a fluctuating market, the price of the stock can move significantly, and the order price can be significantly different than expected. In a limit order, the limit price is the target price for the order to be executed. When selling, the limit price is placed at a level above the current market price. When buying, the limit price is set below the current market price. Limit orders are particularly useful when entering orders that will be executed at the opening of the market, when prices tend to be unstable. |