Kinh Nghiệm Hướng dẫn Stop loss order Fidelity 2022

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Stop-Loss Orders: Using Stop Loss vs. Stop Limit?

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Trading Skills & Essentials
Trading Order Types & Processes

Stop-Loss vs. Stop-Limit Order: Which Order to Use?

By

Mark P. Cussen

Full Bio

Mark Cussen, CMFC, has 13+ years of experience as a writer and provides financial education to military service members and the public. Mark is an expert in investing, economics, and market news.

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editorial policies

Updated November 28, 2022

Reviewed by

Samantha Silberstein

Reviewed by

Samantha Silberstein

Full Bio

Samantha Silberstein is a Certified Financial Planner, FINRA Series 7 and 63 licensed holder, State of California life, accident, and health insurance licensed agent, and CFA. She spends her days working with hundreds of employees from non-profit and higher education organizations on their personal financial plans.

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Part Of

Guide to Trade Order Types

Explore The Guide

    Overview

    Introduction to Orders and Execution

      Overview

      Execution

      Understanding Order Execution

      Open Order

    Market, Stop, and Limit Orders

      Overview

      Market Order vs. Limit Order

      Limit Order vs. Stop Order

      Buy Limit Order

      Buy Stop Order

      Stop-Loss Order

      Determining Where to Set Your Stop-Loss

      Stop-Limit Order

      Stop-Loss vs. Stop-Limit Order

      Buy Limit vs. Sell Stop Order

      Take-Profit Order

    Order Duration

      Overview

      Time In Force

      Day Order Definition

      Good ‘Til Canceled (GTC)

      Immediate Or Cancel Order (IOC)

      Fill Or Kill (FOK)

      Market-On-Open Order (MOO)

      Market-On-Close Order (MOC)

    Advanced Order Types

      Overview

      Trailing Stop

      Conditional Order

      Contingent Order

      One-Cancels-the-Other Order (OCO)

      Iceberg Order

Table of Contents

Expand

    Stop-Loss Orders

    Stop-Limit Orders

    Benefits and Risks of Stop-Loss and Stop-Limit Orders

    Can stop-loss orders be used to protect profits on long and short positions?

    Can an investor get whipsawed by using a stop-loss order?

    How can I determine what levels I should set my stop-loss levels?

    Are stop-loss and stop-limit orders foolproof?

    The Bottom Line

Tradersand investors whowant to limit potential lossescan use several types of orders toget into and out of the market times when they may not be able to place an order manually. Stop-loss orders and stop-limit orders are two toolsfor accomplishing this. However, it is critical to understand the difference between these two tools.

Nội dung chính

    Stop-Loss vs. Stop-Limit Order: Which Order to Use?
    Key Takeaways Stop-Loss Orders Sell-Stop Orders Buy-Stop Orders Stop-Limit Orders Benefits and Risks of Stop-Loss and Stop-Limit Orders Can stop-loss orders be used to protect profits on long and short positions?Can an investor get whipsawed by using a stop-loss order?How can I determine what levels I should set my stop-loss levels?Are stop-loss and stop-limit orders foolproof? The Bottom Line
    Related Articles
    How does a stop order and a stop limit order differ?
    If a Stop-Limit Is Reached, Will It Always Sell?
    Use Stops To Protect Yourself From Market Loss
    Buy Limit vs. Sell Stop Order: Whats the Difference?
    The Stop-Loss OrderMake Sure You Use It
    How do I place a stop-loss order?
    Related TermsVideo liên quan

Key Takeaways

    A sell-stop order is a type of stop-loss order that protects long positions by triggering a market sell order if the price falls below a certain level.A buy-stop order is a type of stop-loss order that protects short positions; it is set above the current market price and is triggered if the price rises above that level.Stop-limit ordersare a type of stop-loss, but the stop price, the order becomes a limit orderonly executing the limit price or better.

Stop-Loss Orders

There are two types of stop-loss orders: one to protect long positions (sell-stop order), and one to limit losses on short positions (buy-stop order).

Sell-Stop Orders

Sell-stop orders protect long positions by triggering a market sell order if the price falls below a certain level. The underlying assumption behind this strategy is that, if the price falls this far, it may continue to fall much further. The loss is capped by selling this price.

For example, lets saya trader owns 1,000 shares of ABC stock. They purchased the stock $30 per share,and it has risen to $45 on rumors of a potential buyout. The trader wants to lock in a gain of least $10 per share, so they place a sell-stop order $41. If the stock drops back below this price, then the order will become a market order and get filled the current market price, which may be higher (or quite likely lower) than the stop-loss price of $41. In this case, the trader might get $41 for 500 shares and $40.50 for the rest. But they will get to keep most of the gain.

Buy-Stop Orders

Buy-stop orders are conceptually the same as sell-stop orders. However, they are used to protect short positions. A buy-stop order price will be above the current market price and will trigger if the price rises above that level.

Stop-Limit Orders

Stop-limit ordersare similar to stop-loss orders. But as their name states, there is a limit on the price which they will execute. There are two prices specified in a stop-limit order: the stop price, which will convert the order to a sell order, and the limit price. Instead of the order becoming a market order to sell, the sell order becomes a limit order that will only execute the limit price or better.

Of course, there is no guarantee that this order will be filled, especially if the stock price is rising or falling rapidly. Stop-limit orders are used in situations where although the price of the stock or other security has fallen below the limit price, the investor does not want to sell the current low price and is willing to wait for the price to rise back to the limit price.

For example, continuing with the above example, lets assumeABC stock never drops to the stop-loss price. Instead, it continues to rise and eventually reaches $50 per share. The tradercancels their stop-loss order $41 and puts in a stop-limit order $47, with a limit of $45. If the stock price falls below $47, then the order becomes a live sell-limit order. If the stock price falls below $45 before the order is filled, then the order will remain unfilled until the price climbs back to $45.

Many investors will cancel their limit orders if the stock price falls below the limit price because they placed them solely to limit their loss when the price was dropping. Because they missed their chance to get out, they will simply wait for the price to go back up. They may not wish to sell that limit price that point,in case the stock continues to rise.

As with buy-stoporders, buy-stop-limit orders are used for short sales, when the investor is willing to risk waiting for the price to come back down if the purchase is not made the limit price or better.

Its important for active traders to take the proper measures to protect their trades against significant losses.

Benefits and Risks of Stop-Loss and Stop-Limit Orders

Stop-loss and stop-limit orders can provide different types of protection for investors. Stop-loss orders can guarantee execution, but price fluctuation and price slippage frequently occur upon execution. Most sell-stop orders are filled a price below the limit price; the difference depends largely on how fast the price is dropping. An order may get filled for a considerably lower price if the price is plummeting quickly.

Stop-limit orders can guarantee a price limit, but the trade may not be executed. This can saddle the investor with a substantial loss in a fast marketifthe order does not get filled before the market price drops through the limit price. If bad news comes out about a company and the limit price is only$1 or $2below the stop-loss price, then the investor must hold onto the stock for an indeterminate period before the share price rises again. Both types of orders can be entered as either day orders or good-til-canceled (GTC) orders.

Choosing which type of order to use essentially boils down to deciding which type of risk is better to take. The first step to doing so is to carefully assess how the stock is trading.

If the stock is volatile with substantial price movement, then a stop-limit order may be more effective because of its price guarantee. If the trade doesnt execute, then the investor may only have to wait a short time for the price to rise again. A stop-loss order would be appropriate if, for example, bad news comes out about a company that casts doubt upon its long-term future. In this case, the stock price may not return to its current level for months or years (if it ever does). Investors would, therefore, be wise to cut their losses and take the market price on the sale. A stop-limit order may eventually yield a considerably larger loss if it does not execute.

Another important factor to consider when placing either type of order is where to set the stop and limit prices. Technical analysis can be a useful tool here; stop-loss prices are often placed levels of technical tư vấn or resistance. Investors who place stop-loss orders on stocks that are steadily climbing should take care to give the stock a little room to fall back. If they set their stop price too close to the current market price, they may get stopped out due to a relatively small retracement in price. They may also miss outwhen the price starts to rise again.

Can stop-loss orders be used to protect profits on long and short positions?

Yes, they can. The term stop-loss order is a bit of a misnomer in this context. While the basic application for stop-loss orders is to prevent steep losses on long or short positions, they can also be used to protect gains on existing positions, since they get activated when the security price trades past a certain level. However, because they get converted to market orders once the specified price level has been breached, the actual price which the trade gets executed may be well below the stop-loss price (for a sell-stop order) or above the stop-loss price (for a buy-stop order).

Can an investor get whipsawed by using a stop-loss order?

Yes, an investor can get whipsawed by using a stop-loss order. For example, their long position may get closed out when the stop-loss order gets executed, but if the stock subsequently reverses course and trades higher, then the loss-making position could actually have been a profitable one if they had held on and not sold earlier.

How can I determine what levels I should set my stop-loss levels?

Technical analysis can be very useful to determine the levels which stop-losses should be set. For example, for a long position, figuring out key tư vấn levels for the stock can be useful for gauging downside risk. The premise here is that once a key tư vấn level crumbles, it may signal additional losses for the stock. Beware of false breakouts, however. Ensure that you research stop-loss levels diligently, using technical analysis and other tools, before you enter them into your trading platform.

Are stop-loss and stop-limit orders foolproof?

Unfortunately, neither stop-loss orders nor stop-limit orders are foolproof or guaranteed to cap your losses the desired level. Since a stop-loss order becomes a market order once the stop-loss level has been breached, it may get executed a price significantly away from the stop-loss price. With a stop-limit order, the risk is that the trade may not get executed the specified limit price. There are pros and cons to both types of orders, so ensure that you do your homework and understand the differences before placing such orders.

The Bottom Line

Stop-loss and stop-limit orders can provide different types of protection for both long and short investors. Stop-loss orders guarantee execution, while stop-limit orders guarantee the price.

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Part Of
Guide to Trade Order Types Guide

How does a stop order and a stop limit order differ?

If a Stop-Limit Is Reached, Will It Always Sell?

Use Stops To Protect Yourself From Market Loss

Buy Limit vs. Sell Stop Order: Whats the Difference?

The Stop-Loss OrderMake Sure You Use It

How do I place a stop-loss order?

Partner Links

Stop-Limit Order Definition

A stop-limit order is a conditional trade over a set time frame that combines features of stop with those of a limit order and is used to mitigate risk.
more

Order-Sends-Order (OSO/OTO) Definition

An order-sends-order (OSO), aka order-triggers-other (OTO), is a set of orders stipulating that if the primary order executes, then one or more secondary orders also will be placed.
more

What Does Above the Market Mean?

“Above the market” refers to an order to buy or sell a price higher than the current market price.
more

Stop Order Definition

A stop order is an order type that is triggered when the price of a security reaches the stop price level. It may then initiate a market or limit order.
more

Order-Triggers-Two (OTT) Definition

An Order-Triggers-Two (OTT) condition is a contingency whereby when a primary order is filled, two secondary orders are placed as a result.
more

What Does “At the Lowest Possible Price” Mean?

At the lowest possible price is a security trading designation instructing a broker to execute a buy order for the smallest amount that can be found.
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