Imagine you walk into a mall to buy a new pair of sneakers but you’re only willing to pay a certain price for it. You tell the seller, “I’ll buy it, but only if the price drops to ₦3,000.” Then walk away, and if the price later drops to that amount, the seller makes the sale. That’s exactly how a limit order works in investing.
Let’s say you’re using a stock investment app like Trove, and you spot a stock you like, Apple or Dangote Cement plc, but you think the current price is too high. You don’t want to buy it now, but you’d be happy to buy it if it drops to your preferred price. That’s when you set a limit order.
In this blog post, we’ll break down limit order in the easiest way possible.
What Is A Limit Order?
A limit order is a type of order you place in the stock market to buy or sell a stock only when it hits a price you set that is your limit, or a price that you are willing to pay for it.
For instance, if a stock is currently ₦1,000, but you only want to buy it if it drops to ₦500. You set a buy limit order at ₦500. Then whichever app you are using keeps watch for you. If the stock never drops to ₦500, nothing happens. But if it does? Boom. The system automatically buys it for you.
On the other hand, you can also use a sell limit order. Maybe you own a stock that’s currently ₦4,800, and you’d only like to sell it if the price goes up to ₦5,500. You set a sell limit order at ₦5,500. Once it hits your price, it sells automatically.
A limit order puts you in control. You’re not just going with the flow you’re setting the terms for yourself and your stock.
Why Use A Limit Order?
Because sometimes, the market moves fast, and watching prices all day isn’t the life you signed up for.
Using a limit order helps you:
- Avoid overpaying for a stock you like.
- Lock in profits at a price you’re happy with.
- Stay disciplined, instead of making emotional decisions based on market hype.
It’s like saying, “I’m interested, but only on my own terms.”
Buy Limit Order vs. Sell Limit Order Understanding the Difference?
Let’s break it down even further:
- Buy Limit Order
You set a maximum price you’re willing to pay.
Example:
You want to buy a stock, but not more than ₦2,000.
So you place a buy limit order at ₦2,000.
- Sell Limit Order
You set a minimum price you’re willing to sell at.
Example:
You have a stock but only want to sell if it hits ₦7,000.
So you place a sell limit order at ₦7,000.
Whether you’re buying or selling, the rule stays the same: the trade only happens if the market hits your price or better.
When Should You Use a Limit Order?
Use it when:
- You want to buy low or sell high — literally.
- You’re not in a rush.
- You want to avoid surprises in fast-moving markets.
- You’re working with a budget and need to stick to it.
Let’s say you’re watching Tesla and it’s dancing around ₦10,000. You like it, but only if it cools down a bit. You set a buy limit at ₦9,000. The day it hits that price? It’s yours. No stress, no need to watch it every five minutes.This simply makes investing so much easier.
Conclusion
A limit order is like setting boundaries with your money. You’re telling the market, “I’m here to invest but on my own terms.”
It’s one of the simplest tools to help you invest smarter without being glued to your screen all day.
So the next time you’re using any investment platform and you’re not loving the current price of a stock, remember you don’t have to settle. Just set a limit order and let your money move when the market meets you halfway.
