Limit Order

A limit order is an instruction to your broker to buy or sell a security at a specified price or better. A buy limit order executes only at the limit price or lower, while a sell limit order executes only at the limit price or higher. This gives you control over the execution price but does not guarantee that the order will be filled.

On the NSE and BSE, limit orders are the most commonly used order type. When you place a buy limit order for Infosys at ₹1,450, the order will only execute if a seller is willing to sell at ₹1,450 or less. If the stock is trading at ₹1,460 and never drops to ₹1,450 during the trading session, your order remains unfilled and expires at day end (unless specified as a Good-Till-Cancelled or IOC order).

The advantage over a Market Order is price protection. In volatile markets or for illiquid stocks, a market order could execute at a significantly different price than expected (called slippage). A limit order eliminates this risk. For example, if you want to buy a mid-cap stock with a wide bid-ask spread (₹520 bid, ₹525 ask), placing a limit order at ₹522 could save you ₹3 per share compared to a market order that would fill at ₹525.

Limit orders sit in the Order Book at their specified price level. The exchange's matching engine follows price-time priority: orders at the best price are matched first, and among orders at the same price, the one placed earliest gets priority. Understanding this mechanism helps you decide how aggressive to set your limit price.

On Indian broker platforms, limit orders can be combined with other order types: SL-L (Stop-Loss Limit) triggers a limit order when a specified price is breached, useful for protecting existing positions. Most brokers also support AMO (After Market Orders) that allow you to place limit orders outside market hours for execution at the next day's opening.