Stop-Loss and Stop-Limit Orders

When you place trading orders with your broker, you have more options than just barking "buy!" or "sell!" There are lots of orders that can accomplish lots of things.

For example, if you bought a stock at $20 that is now trading at $50 and you want to sell it if it drops to $40 (locking in a 100% gain), there's a certain kind of order you may want to place -- either a "stop-loss" or "stop-limit" order. The "stop" activates the order if shares sink to a certain price ($40 in your example). The stop-loss order immediately sells the shares at the best price it can, while the stop-limit will sell only if the shares are at $40 or above.

Here are the risks: If, perhaps because of bad news, the shares suddenly fall below $40 overnight and don't rise above that, the stop-loss will sell your shares for less than $40, while the stop-limit order won't sell the shares at all.

This article offers greater detail on these and other orders you can place with your brokerage. There's the market order, for example, which executes at the best available current price.

To learn to more about brokerages and possibly find a better brokerage for yourself, check out our Broker Center.


Read/Post Comments (0) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 503424, ~/Articles/ArticleHandler.aspx, 10/25/2014 12:03:00 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement