A limit order is an order to a broker to buy a specified quantity of a security at or below a specified price, or to sell it at or above a specified price (called the limit price). This ensures that a person will never pay more for the stock than whatever price is set as his/her limit. This is one of the two most common types of orders, the other being a market order.

A limit order gives the customer some control over the price at which the trade is executed, but may prevent the order from being executed.

A buy limit order can only be executed by the broker at the limit price or lower. For example, if an investor wants to buy a stock but doesn't want to pay more than $20 for the stock, the investor can place a limit order to buy the stock at any price up to $20. By entering a limit order rather than a market order, the investor will not be caught buying the stock at $30 if the price rises sharply.

A sell limit order can only be executed at the limit price or higher.

The primary advantage of a limit order is that it guarantees that the trade will be made at a particular price; however, your brokerage will probably charge a higher a commission for the limit order, and it's possible that your order will not be executed at all if the limit price is not reached.