To give a recent example of a stock i had 100 shares in, I sold off 50 shares while it was rising. I used a Limit order. Ok, i understood that. I made a lot of profit on those 50 shares, but still wanted to keep some in (is that poor minded?).

Ok, so now that its declining a bit, and probably going to be a bit volatile, I'd like to set a limit to how low i want it to go until i sell. Is that a "stop-limit" order? Or is that a regular "stop" order? seems like if i made a "stop" order, since its below the current closing market price, itll just execute immediately, if i understand it correctly, but thats not what i want. when i selected "stop-limit", it asked for a "stop" price and a "limit" price. that got me even more confused.

And does this apply to trading after hours? how does one trade after hours? whats different about it?

honestly, ive googled this stuff, im still confused. i just dont want to make a mistake. thanks.

 

good question, i have never really understood it myself.

 

I believe it's been discussed here before [I answered about half of what you asked] and it's on investopedia.com as well. These are the kind of things you typically want to try to understand before trading with real $ but late is certainly much better than never!

Based on your first question you need to go over the posts in this forum and take some notes. There are at least a dozen times where I've commented on how to take profits (losses) that are also in context of a particular situation.

Go over to investopedia and read it carefully. If it's still confusing come tell us what's confusing about it [I'm just going to say exactly what they are] and I'll try to help.

 

I went ahead and helped you out.

http://www.investopedia.com/terms/s/stoporder.asp
http://www.investopedia.com/terms/s/stop-lossorder.asp
http://www.investopedia.com/terms/s/stop-limitorder.asp

If you have any other questions like this go the site and click on 'dictionary' then 'stocks'. You can find several hundred terms there with brief explanations.

I typically don't use stop loss orders unless I'm shorting a stock. While in certain situations stop loss orders can save your a$$, most of the time they just lock in 10% or which ever you choose losses under high volatility. That being said, in today's market place I have been catching myself putting them on swing trades.

 

A stop is a triggered trade. You place the order with the broker and it gets placed at the exchange when something happens. These are not active orders until they are triggered.

A stop order is a market order. When the price is met a market order is placed and filled at the best market price at the time. In a stock taking a nose dive this is the safest route out.

A stop limit order is a limit order. There are two prices, one is the trigger price and the other is the order limit price. Let's say you have 100 shares of ABC worth $100 each. You place a stop limit to trigger at $98 with a limit price of $96. If the stock hits $98 the order gets placed, just as if you did it yourself for $96. If the stock is slowly declining you'll probably get about $97 and change.

Consider what happens if the stock takes a deep dive however. Let's say ABC is a biotech company and FDA approval is denied for their latest multi-billion dollar drug. That stock takes an instant 5% hit down to $95 from $100 and then sinks another 10% in steady fashion to close at $89.50. Your stop order gets placed at the exchange on the first hit to $95 and never gets filled. The price is already below your limit of $96 so you're screwed, you still own 100 shares worth $89.50 each.

If it was a straight stop order it would have filled at $95 since it's a market order with no limit price.

They are a trading tool to limit downside loss when speculating on an outcome. They are of little value to a long term investor.

 

could someone provide an example for a trailing stop?

 

A trailing stop is a stop order which "trails" the current price of the stock by some pre-set amount (in $ or %). It stops trailing when it changes direction. ABC is going up, you have a trailing stop at $2. It climbs to $106 and your stop moves with it to $104. At $106 it turns course and heads down to $103. Your stop kicks in at $104.

 

thanks cthree...

lets say ABC is @ $100 and you do a $10 trailing stop. it goes up to $105, so the stop moves up to $95. ABC then heads south to $100 again, your stop would remain at $95. If ABC then heads up to $120, would the trailing stop then reactivate and start moving up with the stock once it passed $105?

 

Obviously I'm not getting this.

At 10:30:19 I put in an order that "if ABC traded at or below 70.99" it would trigger a market sell order.

At 10:30:23 this order sold ABC @ 71.11. It had never traded below the 70.99 trigger during those 4 seconds. It had traded that low at 10:27 prior to my order going in at 10:30:19. At the time I entered my order the price was 71.09 and moving up.

What did I do wrong?

Thanks

 

First, I don't think you should be using market orders in this situation, use limit orders unless absolutely necessary. My guess is it did trade at 70.99 for a split second and it automatically put in the market sell order. At that point, it's a crap shoot to where you actually sell with a market order.

My question is why are you setting it so close to the 70.99 when it's trading within 10 cents of that trigger? You are just asking for it to be triggered. If you are doing this in order to try not to secure any losses, you are doing it in vain.

If you continue this practice of setting sell orders RIGHT below where you buy it you are going to constantly sell your orders because every stock fluctuates several cents every tick.

I'd say .25$ is the least room you want to give and I still think that's setting yourself up for failure and garaunteed losses over and over again. If your confidence level is so low that you only feel safe putting a sell order 2 cents below your buy order than you don't need to be buying stock.