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Thread: Stop Limit Orders

  1. #1

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    Default Stop Limit Orders

    I have a stop limit order as one of my options, but I'm not sure how to use it or what it's purpose is. I've looked througout USAA and google, but can't seem to find any info.

    Here is the only info I can find on it.

    Stop-Limit Order A combination of a Stop order and a Limit order. This type of order is placed to buy or sell a security at a specified price or better, but only after a given Stop price has been reached or passed.
    Some days I feel like an idiot
    Candlestick crack addict...


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  3. #2

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    Default Re: Stop Limit Orders

    At last a question I can help to answer! This quote is from my own notes and I got the information from Investopedia:


    What Does Stop-Limit Order Mean?
    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better.

    The primary benefit of a stop-limit order is that the trader has precise control over when the order should be filled. The downside, as with all limit orders, is that the trade is not guaranteed to be executed if the stock/commodity does not reach the stop price.

    A stop order is an order that becomes executable once a set price has been reached and is then filled at the current market price. A limit order is one that is at a certain price or better. By combining the two orders, the investor has much greater precision in executing the trade. Because a stop order is filled at the market price after the stop price has been hit, it's possible that you could get a really bad fill in fast-moving markets.

    For example, let's assume that ABC Inc. is trading at $40 and an investor wants to buy the stock once it begins to show some serious upward momentum. The investor has put in a stop-limit order to buy with the stop price at $45 and the limit price at $46. If the price of ABC Inc. moves above $45 stop price, the order is activated and turns into a limit order. As long as the order can be filled under $46 (the limit price), then the trade will be filled. If the stock gaps above $46, the order will not be filled.

    Lady
    If you think education is expensive, try ignorance. - Derek Bok

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  5. #3

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    Default Re: Stop Limit Orders

    Thanks Lady

    I think I now understand the buying part, but I'm a little confused on how I would use this to sell
    Candlestick crack addict...

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  7. #4

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    Default Re: Stop Limit Orders

    Quote Originally Posted by JTH View Post
    Thanks Lady

    I think I now understand the buying part, but I'm a little confused on how I would use this to sell
    I'll give that a shot as well, and if I get it wrong, someone please correct me, okay?

    So now let's assume that ABC is trading at $40 and we want to sell the stock once it begins to show some serious downward momentum, but we don't want to just dump it. We put in a stop-limit order to sell with the stop price at $35 and the limit price at $34. If the price of ABC Inc. moves below $35 stop price, the order is activated and turns into a limit order. As long as the order can be filled over $34 (the limit price), then the trade will be filled. If the stock gaps under $34, the order will not be filled.

    How did I do?

    Lady
    If you think education is expensive, try ignorance. - Derek Bok

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  9. #5

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    Default Re: Stop Limit Orders

    Quote Originally Posted by XL-entLady View Post
    How did I do? Lady
    Well you're doing better than me, but I'm curious about the gap part? What if the ABC opens @ below the stop price? IT doesn't get filled heh?
    Candlestick crack addict...

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