Buy Limit Order
Buy Limit Order - Definition
A buy limit order is an instruction to your brokerage firm to buy a security at or below a specific price. A good example of when to use a buy limit order is if you want to buy a security on a back test of a breakout area. Let's say stock A breaks resistance at $100 and runs straight to $110. This may not be a good trading opportunity as you could quickly find yourself chasing the stock. So, instead of showing up late to the party, you will place a buy limit order to purchase stock A at $105, in anticipation of the next leg up. Conversely, if you are looking to book profits on a short position, you will want to enter a buy limit order at your profit target for the trade. Day traders will want to stick to market orders, due to the fact you have to focus on reading the tape and overall flow of orders.