What is a limit order?

A limit order is defined as an instruction to buy or sell a security at a specific price or at a better price. This means that for a buy limit order, the investor specifies the highest price they are willing to pay, and the order will be executed only if the market price reaches that level or lower. Conversely, for a sell limit order, the investor sets a minimum price, and the order will only be executed if the market price hits that level or higher.

The purpose of a limit order is to give investors greater control over their trade prices and to protect them from unfavorable market conditions. This contrasts with other types of orders, such as market orders, which are executed immediately at the current market price regardless of the specified limit.

The other options describe different types of orders or characteristics that do not align with what a limit order is. For example, a market order provides immediate execution but does not guarantee a specific price. An order that cancels after a specified period refers to a time-limited order, but that is not the primary defining feature of a limit order. Similarly, an order placed only at the end of a trading day does not accurately characterize a limit order’s function or timing. Therefore, recognizing a limit order as one that specifies