Sell Stop A sell stop order is an order to sell at a price below the market. Once the order price is touched, your order becomes a market order. Such orders are used to exit a long position or enter a short position on market weakness. When used to exit an existing position, the term stop loss is used (see below). Stop Loss The term stop loss is applied to a position that offsets an existing position. As such, this order is no different than either a sell stop or a buy stop as described above. A stop loss order is designed to limit loss, hence its name. Orders are not entered as stop loss orders but rather in the variety of ways described earlier or in the sections that follow. Hence, stop loss is a generic term that could be applied to orders above or below the market. Stop Limit The stop limit order is a specific type of stop order used either above or below the market. A sell stop limit means that you want to sell below the market but at a price no lower than the price of your limit. In other words, you must be filled at your price or not at all. This is a good way to guarantee a fill at a certain price, but if the market goes through your price and doesn't trade at it, or the order can't be filled even at the limit price, your order won't be filled. You may not get the protection you want if you are using a stop limit as a stop loss. The reverse holds true for stop limit orders above the market. Stop limits should be used when you want to avoid a bad fill, or when you are working with a precise technical level. I do not recommend using stop limits for the purpose of stop losses. As noted earlier, these orders may not be acceptable at the given electronic exchange or network you are using. Please be certain to check in advance. Stop Close Only This is an instruction to sell or buy within the closing minute of trading. A sell stop close only order will be executed during the closing minute of trading. A buy stop close only will be executed at or above the given price during the last minute of trading. Many times the fill price will not be in agreement with the last tick or settlement price due to the time span during which a stop close only order can be filled. Remember—before using this order, make certain it is a valid order type. While this type of order is not usually accepted for electronic order entry, your broker may be willing to execute such an order for you manually assuming you release the broker from liability. stock investment guide ~ online trading |