Which order type requires execution at a specific price or better?

• A. Good Till Date
• B. Limit Order
• C. Day Order
• D. Market Order

Answer: (B)

The order type that requires execution at a specific price or better is a limit order. This type of order allows traders to specify the maximum price they are willing to pay when buying or the minimum price they are willing to accept when selling. By setting these conditions, a limit order helps ensure that a trader does not buy at a higher price than desired or sell at a lower price than intended.

For instance, if a trader wants to buy shares but believes the current market price is too high, they can place a limit order at their desired price. The trade will only execute if the market price reaches that level or falls lower. This gives traders greater control over their transactions compared to other order types.

In contrast, other order types do not have the same strict price conditions. A day order is valid only during the trading day and expires if not executed, but it doesn’t specify execution at a particular price. A market order prioritizes immediate execution at the current market price, regardless of what that price is, which does not provide the same level of control as a limit order. Lastly, a good till date order remains active until a specified date unless filled or canceled, but like a day order, it does not imply execution at a specific price.