What is the difference between a sell stop and a sell stop limit order?
Sell stop orders are used to protect your profit from loss. It could be either a sell stop order or a sell stop limit order. A sell stop order is similar to a market order. When you place a sell stop order you tell the stockbroker to sell your securities at the current market price. That means it is unrestricted. For example, an investor bought stock ABC at a price of $20 and then the price went up to $30. To protect his gain the investor, therefore, puts a stop price at $25. If the price of the stock goes to $25 or below, his order will be activated. It then will be executed around $25, depending on if the stock is volatile or not. Again, the $25 sell stop order determines when your order will become active; it does not mean it will be executed at exactly $25. It could be executed at a lower or higher price, since it is similar to a market order.
A sell stop limit order is when you specify to your broker an interval price to sell your securities. The order is always placed below the present market price. A sell stop limit order requires you to specify a stop price and a limit price. For example, a trader bought a stock at a price of $20 and now the stock is trading on the market at $30. To secure his profit he would put a sell stop limit order as follow: a stop at $28 and a limit at $25. When the stock goes to or below $28 the order is activated as a sell limit order and will be executed at the best price available between $28 and $25. In other words, your guaranteed selling price is between $28 and $25.
Sell stop orders are used to protect your profit from loss. It could be either a sell stop order or a sell stop limit order. A sell stop order is similar to a market order. When you place a sell stop order you tell the stockbroker to sell your securities at the current market price. That means it is unrestricted. For example, an investor bought stock ABC at a price of $20 and then the price went up to $30. To protect his gain the investor, therefore, puts a stop price at $25. If the price of the stock goes to $25 or below, his order will be activated. It then will be executed around $25, depending on if the stock is volatile or not. Again, the $25 sell stop order determines when your order will become active; it does not mean it will be executed at exactly $25. It could be executed at a lower or higher price, since it is similar to a market order.
A sell stop limit order is when you specify to your broker an interval price to sell your securities. The order is always placed below the present market price. A sell stop limit order requires you to specify a stop price and a limit price. For example, a trader bought a stock at a price of $20 and now the stock is trading on the market at $30. To secure his profit he would put a sell stop limit order as follow: a stop at $28 and a limit at $25. When the stock goes to or below $28 the order is activated as a sell limit order and will be executed at the best price available between $28 and $25. In other words, your guaranteed selling price is between $28 and $25.
Stop order vs Stop Limit order
![Stop order vs Stop Limit order]()
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October 22, 2009
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