Investing 101: Stop Limit Order

Stop Limit Order

As per the SEC definition: A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order.  Once the stop price is reached, a stop-limit order becomes a limit order that will be executed at a specified price (or better).  The benefit of a stop-limit order is that the investor can control the price at which the order can be executed.

A few points about stop limit orders:

  • The stop price for buy orders is placed above the current market price.
  • The stop price for sell orders is placed below the current market price.
  • The stop price does not need to be the same as the limit price.
  • The trade is not guaranteed to be executed if the stock/commodity does not reach the stop price. 
  • The investor has much greater precision in executing the trade.

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shakaama

Ex law school student. I was kicked out for revealing I had a heart actually beating inside. I used to be in a modern dance company. I'm working on my 7 miracles to be proclaimed a saint by the pope. #1 is really hard, but once i get over that hump the other 6 will be a cinch.

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