In the context of equity market structure, understanding different order types is crucial for executing trading strategies effectively. Among the various types of orders, a market order and a limit order serve different purposes in terms of execution and price control.
A market order is executed immediately at the best available price, while a limit order specifies a price at which the trader is willing to buy or sell an asset. For instance, if a trader wants to purchase shares of a company but only at a specific price, they would use a limit order.
Given this context, which of the following statements correctly describes the nature of a limit order?