ATrade Buy/Sell Tools Explained
Take a look at HERO today. Prior to their Bankruptcy announcement this morning HERO appeared to be forming a nice squeeze pattern... Had you owned 1000 shares at 70 cents yesterday... You would have had 700 dollars of stock. With a limit stop of 60 cents to "protect" you. Your stock, which you would be now kicked OUT of HERO this morning would be worth 230 dollars... Worse yet... HERO could have EASILY rebounded back up to where it dropped from. In this case it did not but had it done so, you would be knocked out at the bottom and looking longingly up. This is what a "Trailing" stop or limit is designed to avoid.
Stop order (same as Stop Market Order): Buy or sell the security at the market (at whatever the current price is, which may or may not be the stop price) when the stock price touches a predetermined price. When the security touches that price, your order immediately becomes a market order. Stop orders can be to close or open, they are not limited to close only.
Stop Limit Order : Same as a Stop order, except you only want to buy/sell the security at the limit price, or better. It does not protect you in fast moving markets, as the stock can trade away from the limit price without your order being executed.
Stop orders or stop limit orders are not necessarily used for losses, or prevent a further loss, they can also be used to protect a profit. If you buy AMD @ $10.00, and held it to $20.00, you could put a sell stop order in at $18.00 (assuming the stock is above $18.00 when you put the order in). Then, if AMD touches $18.00, even for one trade, your order immediately becomes a market order, and your shares of AMD are sold at whatever price they can get. Could be $17.90, could be $18.05 (remember, exchanges are obligated to get you the best price). In the same situation, if you placed a sell stop limit order @ $18.00, once the stock touches $18.00, your order immediately becomes a sell limit order, to be executed at $18.00 or better. In both instances, you would sell the stock at a profit from where you bought it.
Stop market and stop limit orders are VERY common, just as buy sell limit / market orders are.
I try to use only "Trailing" orders when I'm using them for a stop loss. The video will explain why.
We'll leave it at that for now. All or None [AON] Fill or Kill, & Market on Close orders aren't used much for small investors. However, GTC, Day only, pre-post market only are used by me frequently.
Investopedia has a great site to lear all the financial and trading terms as you go:
Stop Losses Explained
This is a GREAT video and one you MAY have already seen but we thoughtRead More