What is a Limit Order? The Ten Most Frequently Asked Questions About "Limit Orders"

What Does "Placing an Order" Mean?

Placing an order refers to a trade instruction set by investors in the trading market that is not immediately executed. Through placing orders, investors can specify the price and quantity for buying or selling a financial asset, allowing the trade to be automatically executed when the market price meets the specified conditions.

There are two common types of orders: limit orders and stop orders.

1. Limit Order: Investors specify the price at which they wish to buy or sell a financial asset. The trade will be executed when the market price reaches or is better than the specified price. For a buy limit order, investors aim to purchase an asset at a price lower than the current market price; for a sell limit order, the goal is to sell an asset at a price higher than the current market price.
2. Stop Order: Investors specify a trigger price and an execution price. When the market price reaches or falls below the trigger price, the order becomes active, turns into a market order, and is executed at the market price. Stop orders are typically used to limit an investor's losses, i.e., automatically executing a sell trade when the market price drops to a certain level to prevent further losses.

Placing orders allows investors to participate in the market more flexibly without needing to constantly monitor market prices. They provide a convenient way for investors to execute trades when they're not able to do so immediately, and help investors manage trades according to their expectations and trading strategy. However, it's important to note that the execution of orders is not absolutely guaranteed, as market prices must reach or exceed the specified conditions for execution. Furthermore, market volatility and liquidity can cause the execution price of orders to be not exactly as expected.

Top Ten Frequently Asked Questions About "Placing Orders"

What is placing an order?

Placing an order refers to the act of setting a trade instruction by investors in the trading market to specify the price and quantity for buying or selling a financial asset without immediate execution.

Why do investors use orders?

Investors use orders to automatically execute trades when the market price reaches specific conditions, according to their trading strategy and expectations, offering a more flexible way to participate in trading.

What types of orders are there?

Common types of orders include limit orders and stop orders. Limit orders specify a price for buying or selling a financial asset, while stop orders become active and are executed at market price when the market price reaches or falls below a certain trigger price.

Are orders executed immediately?

Orders are not executed immediately but are executed when the market price reaches or exceeds the specified conditions. Execution depends on market liquidity and the situation when the price meets those conditions.

Do orders have an expiry?

Orders can have an expiry, allowing investors to specify the validity period of an order. Orders that are not executed by their expiry will be automatically cancelled.

What is the execution price of an order?

The execution price of an order depends on the market price condition when it reaches or exceeds the specified conditions. For limit orders, the execution price is the specified limit price; for stop orders, it is the market price.

Can orders be modified or cancelled?

Before an order is executed, investors can usually modify or cancel it as needed. However, once an order is executed, it can no longer be modified or cancelled.

Is the execution of an order guaranteed?

The execution of an order is not absolutely guaranteed. Execution requires that market prices reach or exceed specified conditions, but market volatility and liquidity may cause the execution price to be not exactly as anticipated.

Can investors set multiple orders?

Yes, investors can set multiple orders, each targeting different financial assets, prices, and quantities.

Are orders applicable to all trading markets?

Orders are applicable to most trading markets, including stock markets, foreign exchange markets, and futures markets. However, different trading markets and exchanges may have different rules and execution methods for orders.