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Limit Order - Definition
Below, you'll find a definition of this investing term...

Definition:  A stock order placed with a broker in which you specify what price you want to pay for a stock.  If a stock was trading at $60 and you placed a limit order for $55, you are essentially telling the broker "I want to pay $55 or less per share for this stock."  If the stock drops to that level, you will buy the stock.  If it doesn't, you won't.

TeenAnalyst Advice: Limit orders are preferred by most investors because they allow you to determine what price you will pay.

The reason I recommend limit orders is because if you place an order after the market is closed, it'll be executed the next morning.  Sometimes a stock will open at a price significantly different from the previous day's close.  A stock may close at $45 one day but open at $50 the next day.  Limit orders prevent you from paying more than you expected.

Unfortunately, they usually cost a few extra dollars per trade.

 

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Investing - Learn more about investing basics and strategies.

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