How to Use Limit Orders

Limit orders taking guesswork out of the trading equation by specifying exact buy and sell prices. Where a market order executes at the best available current price, a limit order specifies an explicit price and number of shares at which to execute a trade to buy or sell.

Example: A trader may set a limit buy order if a stock price, currently at $50.00, at $49.50 if he believes the stock price will decline before rising. The order would be completed if and only if the stock price drops to $49.50, and would remain in effect until canceled by the trader.