A type of limit order; an order to sell a security or commodity at a pre-defined price (at least for a sell order, or better – i.e., higher). A broker will execute the order only subject to the limit price (price restrictions) set by the client (investor).
For example, a client posting a limit order to sell XYZ stock at 20 will not get his/ her order executed as long as the stock is trading below $20. The order will not even be executed if the stock has reached 19.99 level. However, once the stock price hits or increases beyond the limit, the order will be immediately filled.
A sell limit order allows investors to set a minimum price to sell a stock for—and hence the transacted price can be controlled as per an investor’s needs and expectations.
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