A 'limit order' allows you, the investor, to specify the price at which your shares can be bought or sold by choosing a 'limit' price. As a seller, this means that your shares will not be sold at any price below your limit, while as a buyer this means that you will not be buying shares at a price higher than your limit.
Mason places an order to sell 20,000 shares with a limit of $7.55. The market price is $7.50 when Mason submits his order, so it is not filled straight away. Half an hour later, the best price moves up to $7.56, and Mason's order is matched with a buyer.
Anna places an order to buy 50,000 shares as a limit order. The market price is $7.50, but she doesn't mind paying a little bit extra to guarantee her order is filled quickly, so she chooses a limit of $7.55. As Anna's order fills, the price moves up to $7.54 and she ends up paying an average price of $7.52
Market Then Limit Orders
A 'market then limit' or 'market to limit' order will fill at whatever the best price currently available in the market is (i.e. a sell will match the highest buyer and a buy order will match the lowest seller). The 'limit' condition means that if your order is not filled immediately and the market price moves away, your order will be turned into a limit order at the price you paid for the filled portion of your order.
Cynthia places an order to buy 1000 shares as a market to limit order. The best price is $7.50 when she submits the order and the entire order quickly fills at that price.
Julian places an order to buy 100,000 shares as a market to limit order. The price is $7.50 when Julian submits his order but he only gets 20,000 units filled before the best price moves up to $7.53. Julian's order then turns into a limit order at $7.50 (the price he got for his first fill). A few minutes later the best price drops to $7.48, and the remainder of Julian's order is filled.
Does Selfwealth offer conditional order types (e.g. stop loss)?
Yes! For more information on conditional order types for ASX shares please click here.