How to Set a Limit Order on Robinhood: The Ultimate Guide

default image

Want to become a pro at using limit orders on Robinhood? You‘ve come to the right place.

This comprehensive 3,000 word guide will teach you everything you need to know about limit orders on Robinhood.

You‘ll learn how to master advanced limit order tactics to maximize profits and reduce risks.

So whether you‘re a rookie Robinhood trader or a seasoned pro, bookmark this page. Let‘s dive right in!

What Exactly Are Limit Orders?

Before we get into the nitty-gritty details, let‘s start with the basics…

A limit order is an order that lets you set a price threshold for buying or selling a stock.

For example:

  • You want to buy Stock XYZ at no more than $50 per share. So you set a limit price of $50 on your buy order.

This means your trade will only execute if the price drops to $50 or lower.

  • You want to sell Stock ABC at no less than $25 per share. So you set a limit price of $25 on your sell order.

This means your trade will only execute if the price rises to $25 or higher.

In both cases, you have control over the price you pay or receive for the trades. You "limit" how much or how little you‘re willing to accept.

Limit orders give you precision and control compared to simple market orders that take whatever price is available.

Now let‘s see why limit orders are so useful on Robinhood specifically…

Why You Should Use Limit Orders on Robinhood

Robinhood exploded in popularity by offering commission-free trading of stocks, ETFs, and options. They pioneered easy and accessible trading on mobile and web apps.

But Robinhood isn‘t just for casual investors. Active traders have embraced the platform for its slick interface and robust features.

Here are 5 key reasons why limit orders are a Robinhood trader‘s best friend:

1. Control the Price You Pay or Receive

Limit orders let you dictate the entry or exit price for trades, rather than leaving it totally up to the market. This helps you stick to your trading strategy and predetermined price targets.

For instance, you can ensure you never overpay when buying shares, or get stuck with an unfavorable sale price when selling. The power is in your hands!

2. Potentially Get Better Prices

In volatile markets, share prices fluctuate rapidly throughout the trading day. Limit orders allow you potentially get better prices compared to market orders.

Rather than accepting the current market ask/bid, you can set limits to capture price moves in your favor. Patience and precision can pay off!

3. Manage Your Risk

Limit orders enable you to control downside risk by setting worst-case scenarios for buy and sell levels. You limit how much you can lose on a trade using disciplined price thresholds.

This helps reduce the emotion in trading decisions and prevents overpaying or panic selling into losses during periods of high volatility.

4. Automate Your Trades

Once you set your limit orders, you can sit back and let them execute automatically once the price thresholds are reached. No need to watch the markets like a hawk!

Limit orders are like putting your trades on autopilot. They trigger under the conditions you predefine without any manual intervention needed.

5. Implement Strategies Like Scale Trading

Savvy traders use advanced strategies like scaling into and out of positions over time using incremental limit orders.

This allows greater flexibility like dollar cost averaging or taking partial profits at milestones along the way up.

Okay, hopefully you‘re convinced on why limit orders are so crucial for Robinhood. Now let‘s learn how to actually use them…

Step-by-Step Guide to Placing Limit Orders on Robinhood

Placing basic limit orders on Robinhood only takes seconds. Just follow these steps:

Buying Stocks With Limit Orders

  1. Search for the stock you want to buy on Robinhood.

  2. Tap the "Trade" button at the bottom.

  3. Select "Limit" from the order type selector.

  4. Enter the maximum price per share you’re willing to pay under "Limit Price".

  5. Enter the number of shares you want to buy under "Quantity".

  6. Review the order details and tap "Place limit order".

For example, say you want to buy shares of Apple (AAPL) at no more than $150 each. The current market price is $160.

You would:

  • Set the Limit Price at $150
  • Quantity – let‘s say 25 shares
  • Hit "Place limit order"

Once submitted, this limit order will execute and buy AAPL shares if the price drops to $150 or lower.

Selling Stocks With Limit Orders

To sell shares using a limit order:

  1. Tap on the stock in your Robinhood account you want to sell.

  2. Tap the "Trade" button.

  3. Select "Limit" order.

  4. Enter the minimum price you’re willing to sell each share for under "Limit Price".

  5. Enter the number of shares you want to sell under "Quantity".

  6. Review and tap "Place limit order".

For example, say you own 50 shares of Microsoft (MSFT) at $295 that you want to sell at no less than $310 per share.

You would:

  • Set the Limit Price to $310
  • Quantity – 50 shares
  • Review and submit the sell limit order

This will sell your 50 MSFT shares once the price rises to your limit of $310 or above.

Easy right? Now let‘s dive into some pro trading tactics using Robinhood limit orders…

Advanced Limit Order Strategies and Tips

While basic limit orders are straightforward, you can level up your trading like a pro using these advanced limit tactics on Robinhood:

Dollar Cost Average Into a Stock

Say you want to invest $5000 into Stock XYZ over a few months. Instead of buying all the shares at once, you could place multiple small recurring limit orders.

For example, you could place 5 limit orders each month for $1000 at 5-10% below the market price. This brings down your cost basis.

Scale Out of Winning Positions

To lock in profits systematically on a winning trade, use a ladder of incremental limit sell orders at higher price levels to scale out over time.

Buy on Dips

Strategically place lowball limit orders at discounted prices to capture sharp dips and corrections in stocks you want to buy. Be ready to grab deals!

Take Profits at Resistance

Identify overhead resistance levels where rallies could stall out. Place limit sell orders at those technical levels to lock in some gains.

Hedge Risk with Options

Hedge stock positions against heavy losses by using limit orders to automatically buy protective put options if prices breach support.

Use Stop-Limit Orders

Combine stop loss market orders with limit orders to control slippage on volatile stocks while managing downside risk.

Trade Pre-Market and After Hours

Use Robinhood Gold to trade before and after regular market hours. This allows you to place limits capturing extended session price movements.

Go Mobile

Utilize the Robinhood app to place and manage limit orders on-the-go. React faster to changing market conditions.

Here are more pro tips for maximizing success with limit orders:

  • Review the current bid-ask spread before setting limit prices. Factor the spread into your buy and sell limits.

  • Adjust your limits to reflect changing market conditions, but stick to your trading strategy.

  • Be patient. Avoid chasing prices upward with market orders. Discipline pays off.

  • Focus on quality over quantity. Don‘t overload your portfolio with too many open limit orders.

  • Conduct technical and fundamental analysis to identify attractive limit order price levels.

  • Actively monitor open limit orders and modify or cancel if the price action goes against you.

  • Use limit orders as part of a broader trading plan. Combine with other order types for optimal results.

Mastering advanced limit order strategies takes practice. But it‘s one of the keys to levelling up as an active trader on Robinhood.

Now let‘s run through some examples of limit orders in action…

Limit Order Example on Robinhood

Let‘s walk through a real-world example to see limit orders on Robinhood in action:

You want to buy shares of Tesla (TSLA) but only at an attractive price no higher than $190 per share. TSLA currently trades at $210.

Here are the steps to place the limit order:

  1. On Robinhood, search for "TSLA" and select it.

  2. Tap the "Trade" button.

  3. Choose "Limit" order type.

  4. Set the limit price at $190.

  5. Enter quantity – let‘s say 20 shares.

  6. Review the order details.

  7. Submit the limit order.

This places an order to buy 20 shares of TSLA at $190 or lower.

Now you wait for the order to execute. If TSLA stock drops from $210 down to $190, your limit is triggered, and you buy 20 shares at $190 each.

You just bought TSLA stock at $20 below the market price by using a limit order! This simple example demonstrates the power of limit orders for controlling trade entry prices.

Common Limit Order Mistakes to Avoid

While limit orders are extremely useful, traders do make some common mistakes. Be aware of these pitfalls:

  • Setting arbitrary limits without research or a strategy.

  • Leaving limit orders open too long as market conditions evolve.

  • Not adjusting limits for volatility – placing them too tight or too wide.

  • Assuming every limit will definitely get filled once touched.

  • Forgetting about open limit orders instead of monitoring and managing them.

  • Using too many complex limits instead of focusing on high conviction trades.

  • Letting fear of missing out lead to chasing prices using market orders rather than limit orders.

  • Depending solely on limits instead of combining other order types.

The key is using limit orders as part of an overall trading plan. Experiment to find out which limits work best for your own strategy and risk tolerance.

Downsides and Risks of Limit Orders

Limit orders aren‘t perfect. Here are some drawbacks to consider:

  • They may not execute if the stock price never hits your limit. You can miss out on the trade.

  • You may get an inferior fill compared to using a market order in fast-moving markets with high volatility.

  • Sudden news events or earnings surprises can cause limit orders to miss their mark. Stocks can gap down or up over your limits.

  • Other traders may be able to see and trade around visible limit orders on the exchanges‘ order books.

  • Opportunities can disappear quickly in fast-paced momentum stocks. Constant vigilance of your limits is required.

  • Obsessing over individual limit orders can cause you to lose sight of the bigger picture trading strategy.

Overall, limit orders are powerful but need to be used prudently. With the right expectations and precautions, you can maximize their advantages while minimizing the downsides.

Wrapping Up

Congratulations, you‘re now a limit order expert ready to apply your new skills on Robinhood!

To summarize the key points:

  • Limit orders allow you to control entry and exit prices using pre-set price thresholds.

  • They provide precision, automation, and downside protection.

  • Advanced limit tactics like dollar cost averaging and scaling can optimize your trading.

  • Monitor and adjust your limits actively based on changing conditions.

  • Avoid common limit order mistakes like arbitrary prices or overcomplicating.

  • Use limit orders as one tool within an overall strategy.

Mastering limit orders takes practice but is well worth it. By taking control of your trade prices, you will boost performance and take your Robinhood account to the next level!

So start experimenting with the tactics in this guide. And happy smart trading!


Written by Alexis Kestler

A female web designer and programmer - Now is a 36-year IT professional with over 15 years of experience living in NorCal. I enjoy keeping my feet wet in the world of technology through reading, working, and researching topics that pique my interest.