Limit

Limit

Highest or lowest price at which a securities order is to be executed.

A limit order specifies the highest price at which a purchase order is to be executed, or the lowest price at which a sell order is to be executed. For bonds, the limit is indicated as a percentage of the price; for stocks, it is indicated as a price per share. Limit orders are either good for the day or expire at the end of the month. If no limit is indicated when the order is placed, the order is filled immediately and the security is bought or sold on the exchange at the market price. For stocks that involve dividend payments, the bank automatically adjusts existing limit orders to account for the dividend. In the case of an ordinary capital increase or a capital increase out of retained earnings, the order is canceled when share price is quoted ex-rights. Banks and securities service providers usually charge a fee to cover the additional costs of processing limit orders.