Limit Order

A limit order is an instruction to a 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. The order type gives control over 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. A buy limit order for Infosys at ₹1,450 executes only 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, the 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 can execute at a significantly different price than expected (called slippage). A limit order eliminates this risk. For example, on a mid-cap stock with a wide bid-ask spread (₹520 bid, ₹525 ask), a limit order at ₹522 saves ₹3 per share compared to a market order that fills 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. This mechanism shapes how aggressively the limit price is set relative to the inside market.

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, used for protecting existing positions. Most brokers also support AMO (After Market Orders) that route limit orders placed outside market hours into the next day's opening session.