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Posted April 20, 2008 (04:46AM)
I've got a question about stop orders. I want to use a stop order as a stop loss order. I own a stock whose share price is currently $159. If I put in a stop order for $155 (to protect myself if the stock price falls), will the stop order go through immediately, because the price is currently above $155, or will the stop order only go through if the price falls from $159 to $155? thanks. |
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Posted April 20, 2008 (06:54AM)
Good question-- as a 2-week Rookie I've been meaning to ask same thing. I learned the other day about "contingency orders", which might (or might not) be more of what you're looking for. I used it for options---if the price of the underlying stock fell to such-n-such, then the entire option was sold at market. However, I forgot to set it up all over again the next day, so it didn't work!! lol This type of order is good for the day only---no GTC!!! Whether the order goes through or not is "contingent" upon something else happening first. Potaire |
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Posted April 20, 2008 (07:40AM)
Options are way beyond my level for now. If the contingency order has no GTC, it's not what I want. I want a stop order that will protect me from losses when I'm at the beach and not watching share prices rise and fall.
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Posted April 20, 2008 (08:45AM)
I gotcha--gotta fiddle with it everyday. Hard to do from the beach! Good Luck, Potaire |
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Posted April 21, 2008 (05:56AM)
Hey, I used a "trailing stop" for first time today. I set it up to sell the stock if it drops $1.00 from where I bought it. The trailing stop "trails" along behind the stock price as it (hopefully) goes up. As the increment I set was $1.00, I am assuming that the stop will move up $1.00 if/when the stock moves up $1.00. Look into it---seemed pretty simple and straight-forward. I did it on my own without asking anybody (I read MASS about this stuff first), so hopefully nobody tells me I screwed the pooch!!! lol Potaire |
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Posted April 21, 2008 (06:03AM)
Oh ya, I forgot to tell you it allows GTC. I will "tighten it up" (as they say) as the price goes up (make increment smaller-closer to current price). Hopefully I can "lock in" my profits that way.
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Posted April 21, 2008 (06:12AM)
I did get an answer to my original question, via the live chat with a Tradeking person. The answer is that the stop order will only go through if the price falls to the lower price, so it is a stop loss order, which is what I wanted. The trailing stop is something I'll have to learn how to use. I looked at it yesterday and got all confused, but you make it sound simple enough to use. Of course, you can do a trailing stop manually by just going in and adjusting your stop order upward as your stock's price goes up. That's the purpose ,to lock in those profits. |
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Posted April 21, 2008 (06:18AM)
Cool---now you have my permission to go to the beach!!!! lol Good luck, Potaire |
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Posted April 21, 2008 (08:15AM)
Good Afternoon Scarecrow and Potaire: We see you have some questions regarding stop loss orders, it seems you have found answers however a summary of the different stop loss order types will probably be helpful for you and other readers of the forums. The most common stop loss order is your traditional stop order (aka sell stop order). A stop order is an order to buy or sell a security when its price reaches a particular point, thus ensuring a particular entry price, or limiting the investor's loss, or locking in his or her profit. Also referred to as a "stop-loss order". For example a sell stop loss placed on MSFT at $30 when MSFT is $32.00 would trigger only if MSFT feel to $30.00. When a stop order triggers it becomes a market order to be filled at the next available bid. The second popular type of stop loss order is a stop limit order. A stop limit order is an order placed to buy or sell at a specified price (or better) after a given stop price has been reached or passed. This is essentially a combination of a stop order and a limit order into one order and allows the investor to better control their entry or exit price of a security. For example a stop limit order would typically look something like this. Sell 100 POT at a stop $200, Limit of $199.50 (bought at $205). Notice the leeway between the stop and limit prices, remember a limit price does not guarantee an execution, when selling the stock has to be at or above the limit for the order to be filled. To some up stop and stop limit orders, these orders are both used to place a sell order below the current market price, and are also known as stop loss orders. The difference is that a stop order becomes a market order when the stop price is reached guaranteeing execution at the next available market price while a stop limit order becomes a limit order which can be filled only if the limit price is reached or exceeded after the market order is reached guaranteeing a price but not an execution. Be careful to leave some leeway between the stop and limit prices as mentioned earlier if selecting a stop limit order. The third option to protect against a loss or lock in a profit when selling is to place an trailing stop order. Trailing stop orders will actually adjust the exit price as the price of the stock moves up. See the following link for more information on trailing stops. http://content.tradeking.com/wiki/display/tkservice/Trailing+Stops I hope this post was informative, let us know if you have any further questions. Neal Atkins-Supervisor-E-communications-TradeKing |
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Posted April 21, 2008 (12:28PM)
Thanx once again, Neal. The link you gave was one of the sources I learned from over the weekend. If Scarecrow wishes to be able to go to the beach with no worries about his stock, then wouldn't the trailing stop be a better choice for him than a stop-loss?
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Posted April 22, 2008 (11:36AM)
Scarecrow, always use trailing stops...best way to limit your loss while maximizing any gains. As a general rule (you should set trading rules for yourself) I usually set a 10% trailing stop on every trade, if I want get out quickly I'll set a 5% trail. The trail will rise with the stock price, always keeping (X)% behind. If the price starts to fall, the trail holds at the last (x)%, so if the price goes below your trail you will exit the position automatically.
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Posted April 22, 2008 (01:09PM)
Maybe I missed this. You set the trailing stop one day, does it continue on the next day, or does it have to be continually reset, day after day?
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Posted April 22, 2008 (01:12PM)
One other thing, can you do the same selling short?
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Posted April 22, 2008 (02:16PM)
Look up above and you'll see I said "Oh ya, and it allows GTC", or something like that. I had my trailing stop kick intoday, in fact--sold my stock with me doing absolutely nada. As far as the selling short part goes, that is an area I haven't dealt with yet, so I'll let Neal handle that one.
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Posted April 22, 2008 (03:40PM)
like Potaire said you can set it as a Good Till Cancled (GTC) so that its always there. You have to set your trail to were you feel comfortable. I've seen securities swing 10% in one morning only to climb back 15%, if you had a 10% trail you would have gotten out of the position and missed the 5% gain. But this is where discipline comes in, if you hold true to your rules then it really won't matter much.
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Posted April 23, 2008 (04:22AM)
Well, my stop loss order kicked in this morning, the stock's just been frittering up and down the last couple of days so I'm out, and naturally it's bouncing back up after my sell order executed. But the main thing is I locked in some profit, and I can always buy the stock back again if it starts performing better.
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