A regular limit order is a type of order where a single order is placed at a specific price. Unlike the regular market order, this is not the market price. To place this order, a specific parameter called the limit price is needed. This parameter should satisfy the following conditions:
- The limit price should be below the market price for a BUY order.
- The limit price should be above the market price for a SELL order.
If these conditions are not satisfied, the order may either get placed at the market price, essentially converting it into a regular market order, or it may be rejected by the broker as an invalid order.
On placing a regular limit order, it goes through various intermediate states before finally reaching an end state (COMPLETE, CANCELLED, or REJECTED). A regular limit order could stay in the OPEN state for a while until favorable market conditions are achieved, before moving to the COMPLETE state. The following state machine diagram demonstrates...
