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I've always wondered what would happen if I typed in the price wrong while completing a limit order for stocks. If the stock price is $21.62, and I accidentally type in $2.62, have I lost my fortune, or do the order systems have protections built in against this?

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I assume you're talking about a sell order, not a buy order.

When you place a limit sell order, your order is guaranteed to be placed at that price or higher. If the market is currently trading much higher than the price of your sell order, then your mistakenly low limit order will be essentially a market order, and will be filled at the current bid price. So the only way this is a problem is if you want to place a limit sell that is much higher than the current market, but mistakenly place a limit lower than the current market.

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  • I've thought about it as, "this guy just put in a limit sell for $x, whoever wants to pick it up, go ahead". Sounds like that's not the case? – HH- Apologize to Carole Baskin Jul 30 '17 at 2:48
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    Nope. Your order will be matched against existing buy or sell orders. Buy orders are filled from highest to lowest price. Sell orders are filled from lowest price to highest price. – D Stanley Jul 30 '17 at 2:51
  • @horsehair Exchange execution rules do not allow an asset to be traded at a price any lower than the highest current bid nor any higher than the lowest current offer. Why would they? Other than to launder money, what purpose would such a trade serve? – David Schwartz Jul 30 '17 at 22:41
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Limit orders are generally safer than market orders. Market orders take whatever most-favorable price is being offered. This can be especially dangerous in highly volatile stocks which have a significant spread between the bid and ask.

That being said, you want to be very careful that you enter the price you intend into a limit order. It is better to be a bit slower at entering your orders than it is to make a terrible mistake like the one you mention in your question.

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