Limit price

Limit price

See: Maximum price fluctuation

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limit price

The price specified by an investor for a limit order. With a limit order to buy, the price represents the highest price the investor will pay. The price of a limit order to sell represents the lowest price the investor will accept.

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Limit price

1. The price above or below which one is willing or not willing to buy or sell a security. For example, one may wish to buy a stock if the price drops to $20 per share, hold if the price goes above $40, or sell at $30. Both cases represent limit prices. An investor tells his/her broker any applicable limit prices, by which the broker is required to abide.

2. A price of a product, especially a mass-produced product, sufficiently low so as to discourage new entry into that product's market. Monopolists set a limit price by increasing production to more than they otherwise need, which requires potential competitors to spend a greater amount in production in order to match the price. This renders competition unprofitable and maintains the monopolist's control of the market. The practice is illegal in most countries. See also: Antitrust.

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Limit price. A limit price is the specific price at which you tell your stockbroker to execute a buy or sell order on a particular security.

If the transaction can be completed at that price, it goes through, but if that price is not available, no purchase or sale takes place.

The advantage of a limit order is that you won't pay more or sell for less than you want. Since your broker is monitoring the price, it is more likely that the trade will take place at the limit price than if you waited until the security reached that price to place your order.

The potential drawback of setting a limit price, which is also known as giving a limit order, is that the transaction may not take place in a fast market if the price of the security moves up or down quickly, passing the limit price.