If you've ever traded stocks through an online broker, you may have decided to purchase (or sell) a stock based on the latest stock quote, only to see your purchase or sale transaction completed at a different price. While it's usually only a couple of pennies difference, in the case of a stock that's moving up or down quickly, the difference could be significant.

In this case, you placed a "market order", and you got your order to buy or sell completed at whatever the going rate was at the exact moment the trade was completed, regardless of whether you had a real-time quote telling you the price was something different.

To avoid the danger of buying or selling a stock at a price you don't want, you can use a "limit order."

Here's how it works: When you place your order you set a limit price. If you're buying a stock, you set a ceiling for how high you're willing to go, telling the broker to only fill your order if you can get the stock at that price or lower. For example, say you're excited about the Visa IPO today but you see the stock's already shot up over $59. You may want some V stock, but you only want to buy it if you can get it at $58 or lower. You place a limit order, and as soon as the stock hits $58, your order is filled and you get the stock at the price you want. (Obviously if it suddenly goes even lower than $58, you'd get the stock at whatever price it is trading at.)

And it works the same the other way. If a stock has done well for you and you're willing to sell it and take your profits, you can set a limit order to ensure that the stock is sold at your designated price or higher. Using the Visa example again, say Visa is moving up and down like crazy. At $58 you want to hold the stock because you think it will go up further, but at $59 you're thinking it's hitting its limit, or at least it's made you enough profit that you've decided to move on. In this case, you'd place a limit order at $59, and if the stock price hits $59 or jumps even higher, it will be sold.

Using a limit order obviously "limits" your chances of buying or selling a stock. If you're buying and the price never falls to your limit, you don't get the stock. If you're selling and the price never hits the height that you're hoping for, you don't sell the stock. But of course that's the whole point - you only want to buy or sell if you can get "your" price.

One other caveat: When you place a limit order, it's like getting in line to buy or sell a stock. If someone else has a limit order on that same stock at the same price but placed their order before you, their order will get filled first. Again using the Visa example. If you had a limit order to buy at $58, it's possible there could be 15 people ahead of you in line who also are willing to buy at $58. Once some of their orders are filled, it's possible the stock could move back up again before the line ever gets to you. You could be sitting in front of your computer thinking "Hey, it hit $58, why wasn't my order filled?" The reason is that you were too far back in line to get your order completed before the stock moved back up again. This is the risk you take when trying to buy or sell at "your" price.