stock trading

[Kenazo]

Can someone remind me of the difference between a stop order and a limit order? I'm wanting to purchase a particular stock if it falls to $x would i use stop or limit in that instance?

 

[GasX]

Simple version:

STOP order is for limiting losses. If the price DROPS to a certain level that you set, you sell the stock.

LIMIT order is for taking gains. When the stock RISES top a certain level that you set, you sell the stock.

 

[Kenazo]

so I would use stop to purchase when it falls to $x?

 

[GasX]

Actually, for purchasing, a limit order works. At least on all the online trading sites I have used.

STOP orders are for STOPPING losses. I guess my simple version wasn't enought... 😱

LIMIT ORDER EXAMPLES:

You want to buy some Microsoft. It is at $26.50 You make a limit order for buy 100 @ $26. If the price drops to $26, you get 100 shares for $2600.

You then decide that you will be happy to make $400 of this deal. You make a limit order for sell 100 @ $30. If and when the price hits $30, you get $3000 for your 100 shares.

You could also put in a stop order for sell 100 @ $25 just in case the stock keeps dropping and you want to limit your loss, or you could put in another limit order for buy 100 @ $25 to get more shares when the price is cheaper...

 

[Kenazo]

thanks for the info. I guess i'm just a little slow this morning. 🙂 good luck with your msft shares. 😉

 

[GasX]

Originally posted by: Kenazo
thanks for the info. I guess i'm just a little slow this morning. 🙂 good luck with your msft shares. 😉

I was going to buy at $24, but I missed the boat for now... There is always something to buy though... 🙂

 

[Kenazo]

so true. I bought into bombardier @ 3.40 a month ago.. not quite it's lowest, but it's at 4.65ish now (cdn funds)