Stop orders Order (exchange)

1 stop orders

1.1 stop loss order
1.2 sell–stop order
1.3 buy–stop order
1.4 stop–limit order
1.5 trailing stop order
1.6 trailing stop–limit order

stop orders
stop loss order

an example of stop-loss order on candlestick plot. 100 units bought , stop-loss sell order placed 2 monetary units below limit losses.

a stop order, referred stop-loss order, order buy or sell stock once price of stock reaches specified price, known stop price. when stop price reached, stop order becomes market order. buy–stop order entered @ stop price above current market price. investors use buy stop order limit loss or protect profit on stock have sold short. sell–stop order entered @ stop price below current market price. investors use sell–stop order limit loss or protect profit on stock own.

when stop price reached, , stop order becomes market order, means trade executed, not @ or near stop price, particularly when order placed fast-moving market, or if there insufficient liquidity available relative size of order.

the use of stop orders more frequent stocks , futures trade on exchange trade in over-the-counter (otc) market. exact mechanism of stop order may vary between brokers , software platforms. instance, charles schwab defines stop order follows: stop orders , stop-limit orders similar, primary difference being happens once stop price triggered. standard sell-stop order triggered when bid price equal or less stop price specified or when execution occurs @ stop price.

sell–stop order

a sell–stop order instruction sell @ best available price after price goes below stop price. sell–stop price below current market price. example, if investor holds stock valued @ $50 , worried value may drop, he/she can place sell–stop order @ $40. if share price drops $40, broker sells stock @ next available price. can limit investor s losses or lock in of investor s profits (if stop price @ or above purchase price).

buy–stop order

a buy–stop order typically used limit loss (or protect existing profit) on short sale. buy-stop price above current market price. example, if investor sells stock short—hoping stock price go down can return borrowed shares @ lower price (i.e., covering)—the investor may use buy stop order protect against losses if price goes high. can used advantage in declining market when want enter long position close bottom after turnaround.

stop–limit order

a stop–limit order combines features of stop order , limit order. stop-limit order order buy or sell stock combines features of stop order , limit order. once stop price reached, stop-limit order becomes limit order executed @ specified price (or better). limit orders, stop–limit order doesn t filled if security s price never reaches specified limit price.

trailing stop order

an example of trailing stop order. top bottom, operator bought 100 units , placed trailing-stop order 10 ticks below buy price. in second plot time went , price went up, trailing stop went well, being placed 5 ticks below current market price. in last image price went down (not shown) , stop price reached, , order executed.

a trailing stop order entered stop parameter creates moving or trailing activation price, hence name. parameter entered percentage change or actual specific amount of rise (or fall) in security price. trailing stop sell orders used maximize , protect profit stock s price rises , limit losses when price falls.

for example, trader has bought stock abc @ $10.00 , places trailing stop sell order sell abc $1.00 trailing stop (10% of current price). sets stop price $9.00. after placing order, abc not exceed $10.00 , falls low of $9.01. trailing stop order not executed because abc has not fallen $1.00 $10.00. later, stock rises high of $15.00 resets stop price $13.50. falls $13.50 ($1.50 (10%) high of $15.00) , trailing stop sell order entered market order.

trailing stop–limit order

a trailing stop–limit order similar trailing stop order. instead of selling @ market price when triggered, order becomes limit order.