A limit order is a buy or sell stock order with a stated execution price. It stands in contrast to the conventional market order, which enacts a transaction at current market prices. Limit orders often don't execute immediately and allow for predetermination of the desired execution price.
On a buy limit order, the investor enters a price at which the stock purchase is transacted. For example, if a stock currently trades at $10.50 and a buy limit order is set at $10.40, the trade occurs if the stock price falls to $10.40. On a sell limit order, the sale takes place after the prices rise to the stated execution price.