# Limit order

Limit order is an instruction to trade at a specified price or better: a buy cannot execute above its limit, and a sell cannot execute below its limit.

## What it means

A limit order sets a price boundary for a stock trade. A buy limit order can execute at its limit price or lower; a sell limit order can execute at its limit price or higher. It may fill immediately, later, partially, or not at all. A limit price controls the worst permitted execution price, not whether a trade will happen.

An order can be **marketable** when submitted: for example, a buy limit at or above the current best ask may match an available seller. The quoted price and available shares can change before the order reaches the market, so even a marketable limit order is not guaranteed a complete fill. If the limit is not marketable, the order may rest and wait for a matching counterparty, subject to the broker's handling and its time-in-force instruction.

## How it is calculated

The limit price is chosen by the person placing the order; it is not calculated from market data. Its price boundary and the value of any executed shares can be expressed as:

- Buy: `execution price per share <= buy limit price per share`
- Sell: `execution price per share >= sell limit price per share`
- Executed share value: `filled shares × execution price per share`

Here, **execution price per share** is the actual fill price in US$ per share, **buy limit price per share** is the highest permitted buy price in US$ per share, **sell limit price per share** is the lowest permitted sell price in US$ per share, and **filled shares** is the number actually traded, which may be less than the quantity requested. Executed share value is in US$ and excludes commissions or other charges. The limit constrains each fill's price, not the total cost after fees.

## Worked example

Suppose, hypothetically, an investor submits a limit order to buy 100 shares at US$50.00 per share:

1. The buy limit sets a maximum execution price of US$50.00 per share. If all 100 shares fill at that price, executed share value is `100 × US$50.00 = US$5,000`, before charges.
2. If 40 shares instead fill at US$49.90, their executed share value is `40 × US$49.90 = US$1,996`. The unfilled 60 shares may remain open or be canceled, depending on the order's time-in-force and broker handling.
3. If the lowest available ask stays at US$50.10, no shares execute at that ask because it exceeds the US$50.00 buy limit. A later change in available prices could still allow a fill while the order remains active.

For a hypothetical sell limit of US$50.00, the direction reverses: a fill at US$50.10 is permitted, but one at US$49.90 is not.

## Why it matters before you trade

A limit order trades certainty about the permitted share price for uncertainty about execution. A market order instead seeks prompt execution without setting a maximum buy price or minimum sell price. Neither order type guarantees a particular total transaction cost.

Before placing an order, distinguish the quoted bid and ask from prices at which your entire quantity might execute. Available quantity at a quoted price can be smaller than your order. Liquidity, spread, market impact, tick size, trading hours, and time-in-force can all affect whether and when a limit order fills. A missed or partial fill also matters when several stocks are intended to trade together: the executed basket may differ from the planned basket.

## How PreTrAIde uses it

PreTrAIde performs **pre-trade analysis** of a stock basket before any order is placed. A user enters each stock's buy or sell side, quantity, and execution conditions. Its analysis returns a GO, NO-GO, or MODIFY verdict for the basket and each line, with a risk assessment, suggested execution strategy, and plain-language reasoning. Its quantitative layer estimates spread, participation in daily volume, and market impact—factors relevant when checking execution conditions. The product facts do not specify a dedicated limit-order fill-probability calculation.

PreTrAIde is decision-support software, not a broker. It does not receive, transmit, or execute limit orders; users place any trades themselves through their own broker.

## Common mistakes

- **Treating the limit as a fill promise.** A qualifying counterparty and sufficient available shares are still needed.
- **Confusing a buy and sell limit.** The buy limit is a ceiling; the sell limit is a floor.
- **Assuming a full fill.** Part of an order can execute while the rest remains unfilled.
- **Ignoring time-in-force.** It governs how long an unfilled order can remain active, subject to broker and market rules.
- **Equating the limit with total cost.** Commissions or other charges can change the amount paid or received.

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Source: https://pretraide.com/glossary/limit-order