What do limit orders allow investors to do?

Limit orders are a type of order that investors use to buy or sell a security at a specific price or better. By setting these specific price thresholds, investors have greater control over the price at which they are willing to transact. For example, if an investor places a limit order to buy a stock at a price of $50, the order will only be executed if the stock's price reaches $50 or lower. Conversely, if selling, the order is executed only at the limit price or higher.

This mechanism allows investors to avoid unexpected price changes and ensures they do not buy at prices higher than they are willing to pay or sell at prices lower than they desire. Consequently, limit orders are particularly useful in volatile markets where prices can fluctuate rapidly.

The option mentioning trading only with preferred brokers, along with the one about specifying the amount of securities to trade, does not accurately represent the primary function of limit orders. While it's true that investors can specify the amount when placing a limit order, the core feature that distinguishes limit orders from other types of orders is the ability to set a specific price threshold.