- Buy Limit Order allows buying stocks at a specific price or lower
- It is useful when you want to buy a particular stock only at a price you're willing to pay
- It doesn't guarantee the purchase at the desired price due to market conditions
- It can be used when stocks are volatile and change price frequently
When is a Buy Limit Order useful?
This type of order can be useful if you want to buy a particular stock but only at a price that you are willing to pay. This is especially useful if the stock is very volatile, so it changes in price a lot.
It's important to note that a Buy Limit Order does not guarantee that you will be able to purchase the asset at the desired price, as the market conditions may not meet your criteria at the time that your stock is sent to be bought. If this is the case, the buying process simply won’t go ahead and the stock won’t be bought for you.
Example of a Buy Limit Order
Let's say you're interested in buying shares of Apple Inc. (AAPL) and it's currently trading at $130 per share. However, you only want to buy the shares if the price drops to $120 or below. In this case, you can place a Buy Limit Order for 10 shares of AAPL at $120.
This means that your broker or platform where you’re investing will only execute the order if the price of AAPL drops to $120 or below. If the price stays above $120, the order will not be sent off and the stock won’t be bought.
But, if the price of AAPL does drop to $120 or below, your order will be sent off and you'll become the proud owner of 10 shares of AAPL at the price you wanted to pay. So, a Buy Limit Order is a great way to take advantage of market conditions and buy stocks at the price you want.