Understanding Limit Orders in Equity Markets

Easy Equity Market Structure Order Types And Instructions

In equity markets, investors can place various types of orders to buy or sell securities. Understanding the characteristics of these order types is essential for making informed trading decisions. Consider the following scenario:

John is a trader who wants to buy shares of XYZ Corp, currently trading at $50. He believes that the stock may drop to $48 before increasing in price. John decides to place a limit order to buy the shares at $48.

Which statement accurately describes John's order type?

A limit order instructs the broker to buy a stock at the market price.

A limit order allows John to buy the stock only if the price drops to $48 or lower.

A market order ensures that John will buy the stock at his desired price of $48.

Hint

Submitted16.7K

Correct15.1K

% Correct90%