What is meant by a limit order? When an order is placed for the sake of purchasing stock at a particular desired price, it is referred to as a limit order. Hence, this implies that either a lower or the set limit price is the only price level used when executing a buy-order limit. On the other hand, a higher price or the sell limit order price is the only one applicable when implementing a sell limit order (Hirt & Block, 2012). On the same note, there is no guarantee to execute any form of a limit order. Hence, unless a limit price is attained by the stock market, it may not be possible to fill a limit order. One of the outstanding merits of a limit order is that it protects investors from exploitation especially when buying and selling stocks from unscrupulous traders. In fact, the pre-determined price is adhered to even if execution is not guaranteed by a limit order (O’Neill, 2012). Similarities and differences between a limit order and a stop order In order to limit possible losses that may be incurred in course of trading stocks, a stop-loss order or simply a stop order is applied. As already hinted out, this type of order offers specific trading instructions to a stockbroker in order to understand when to implement certain transactions since a particular market price should be reached. Nonetheless, both the limit and sell orders have distinct similarities and differences when used in a stock market scenario. It is vital to note that all types of securities may benefit from the principles of stop and limit orders. To begin with, a limit order is implemented based on the set or predetermined price. Nevertheless, a better price than the set price can still be used to execute a transaction. Limit orders typically seek to buy at the most minimum market price or the set target price of a stock (Linnainmaa, 2010). On the same note, sales are made at a given fixed price or at a higher value. However, a stop order works quite differently. A broker is usually given an instruction to execute the transaction if the market price for a stock traverses above the desired target. In the case of sell orders, brokers are only supposed to execute the transactions if prices go below a given value. In regards to buy orders, brokers ca only purchase if price jumps above a given dollar amount. Second, execution of limit orders is usually guaranteed. As a result, desired prices are locked by investors. Once the required prices have been fixed, it is possible for investors to reap the desired profit margins. Nevertheless, the intent is different when it comes to stop orders (Ya-Hui & Chien-Chih, 2015). The main purpose of a stop order is to evade losses that may be incurred in course of trading. Potential losses may be avoided by an investor through a stop order. For instance, buying and selling of securities may be halted for a while if stock price movements are not favorable. In other words, a ceiling is placed by a stop order each time there is a likelihood of a loss. Needless to say, both a limit and stop order are similar because they serve specific intentions and are meant to improve the profit margin for investors in the stock market. In addition, each order requires an instruction before the process of execution. Describe circumstances (with examples) under which the use of these orders would be appropriate Both buy and sell limit