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A limit order is an order to buy or sell a security at a specific price (or better). The trader starts by setting a stop price and limit price, then submits the stop limit order. Once the security reaches the stop price, a limit order is triggered to buy or sell the security (whichever is specified by the trader) for the limit price or better.
The investor sets a stop-loss for $1 below the maximum price and a limit of $0.50 below the stop-loss. If the security is purchased at $100 per share, let’s assume it rises to $101 per share before dropping to $99 per share. This triggers the stop loss. Your broker now generates a limit order to sell the security. But unlike at trailing stop ...
A trailing stop is a stop-loss order that is set at a percentage below the market price. For example, if you set a trailing stop on Company XYZ for 10% below the market price (the market price being $10), then when the stock goes up to $30, the trailing stop will trigger a sale only if the stock falls by 10% from $30.
Example of a Stop Order. For example, let's assume that you own 100 shares of Company XYZ stock, for which you have paid $10 per share. You are expecting the stock to hit $12 sometime in the next month, but you do not want to take a huge loss if the market turns the other way. You direct your broker to set a stop order at $8.50.
Limit Order Example. For example, you want to buy ABC Inc. at $50. The stock is currently trading at $51, so you set a limit order to buy at $50. The price may go up or it may go down, but you know that as soon the stock trades at $50, your order will be triggered and you'll buy at your predetermined price. Once you buy ABC at $50, let's say ...
Stop-loss orders generally are a trading or short-term investing strategy. They are useful because they help reduce the pressure of monitoring your trade day-to-day; the trade is largely set on autopilot. This can be particularly helpful for emotional investors. Even though stop-loss orders offer crucial trading discipline to investors by ...
This makes them very useful in low volume or high volatility markets, but is important to note that this type of order will not be executed if the market price does not meet the order requirements. This can be troubling for investors who need immediate liquidity. A good through order is a trade order with a deadline. Usually, it is a stop loss ...
Traders and investors place hard stops on specific portfolio holdings in an effort to minimize losses. For example, suppose Bob wishes to sell off his 100 shares of stock ABC if they reach $50 per share. Bob places a hard stop on these hundred shares by instructing his brokerage house to automatically sell all 100 shares if their price in the ...
To prevent a stock price meltdown, many investors place stop-loss limits on their stocks, usually at prices 10% to 20% below the current price. Some investors like to 'keep their stops tight,' which means raising this stop-loss limit in tandem with a rising stock price.
For example, if the investor has a stock priced at $10 per share, but he wants to sell if the stock moves to $15, then the Good til Cancelled order will stand until that condition is met, unless the investor intervenes and cancels the instruction. If the stock reaches $15 per share, under the GTC order, the shares will be sold. Without a GTC ...