What is a Stop order?
A Stop order is an order that is used to limit loss or protect profits in a given position. This order has become very popular in the trading world.
The stop order will be used with a limit price. Once the limit price is reached the order will become a market order and get filled. It may be used to limit loss by place a stop under the price of a stock once you buy it. This way the stock cannot fall too much before you exit it.
It can be used to protect profits if you already own a stock and have profits in it. This way you can place a stop so it can not pull back far enough for you to lose all of your gains.
This can let you exit a position at a certain price without having to monitor your position. However it can also get you out too early if the stock falls back hits the trigger for a second and then rallies back up. A stop limit order attempts to take care of this problem.
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