posted
I am still confused about stop limit orders. an example will help...I bought a stock for 0.5 and put a sell order
stop price 0.4 limit price 0.7
Does this mean the stock will be triggered to sell only when it moves down to 0.4 but then will never sell till it reaches the limit 0.7.
and if it just takes off reaching 0.7 without hitting the stop then it does mean it will still not sell? am I right?
I am trying to understand the advantage of using stop limit orders? can anyone give an example of a situation where this would be useful?
Posts: 6 | From: Tampa | Registered: Aug 2005
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posted
first, does your broker even allow stops on pennies? Some do, I understand, but mine doesn't.
In your example, you would own at .5 or .6, selling if it rises to .7 or at .4 if it falls.
Stops are used to protect capital when you can't sit there and baysit it. It's a "dead man's brake" that's triggered by a fall in pps, set by you at some personal comfort level, say, 10% below your buy-in, or maybe 20% below its current price that has risen since you bought it. iow, could be used to limit your loss, or to protect a gain during a dip. Basically, "capital protection."
posted
Thanks Tex, I think choice trade allows it I havent tried it myself. I think it makes sense now. for a newbie like me I would prefer to put a stop limit order with stop price very close to my buy price so as to cut loses and maximize my gains.
Posts: 6 | From: Tampa | Registered: Aug 2005
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posted
sure, understood. And you should. However, as time goes by, you'll see you can relax a bit...
lol, don't get "sloppy," but if you set your stop too close? a dip will trigger it, then you'll be saying, "dang, I coulda made a lot more." That's one reason MMs shake, and also some traders place orders to trigger stops in order to pick up cheaper shares.
But, being new, it's better to limit losses and take profits. As you gain experience, you'll be able to "open up" a bit. But for now? Protect that capital...
posted
I have recently tried to switch over to choicetrade, but they are not registered in Arizona at this time. Can anyone explain what this means? And what steps need too be taken by a broker to get registered in different states. Maybe there is a loophole around this?
Posts: 20 | Registered: Dec 2004
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