What is Foolsaurus?

It's a glossary of investing terms edited and maintained by our analysts, writers and YOU, our Foolish community. Get Started Now!


How to Stop Limit Stock Sale

Original post by David Sarokin of Demand Media

Stock prices can bounce around like bacon fat in a hot frying pan. You may not be able to monitor the price of a stock you own in real time and you may miss the opportunity to react to sudden market changes. You can use a stop-limit sell order to automatically sell your shares at prices you specify, even if you are not available to make a trade in person.

Stop Price

Select your sell stop price. This is the price at which you want a trade to be entered. For example, if a share of your stock currently sells for $50, you may select a lower value, such as $40, as your stop price. If the shares drop to $40, your sell order will be entered automatically.

Limit Price

Select your limit price. The limit price is the minimum price at which you are willing to sell your shares. The limit price can be the same as the stop price or can be a different value. For example, if your stop price is $40 and your limit price is $35, your sell order will be entered when the stock price drops to $40, but you are willing to sell the shares for a minimum of $35. If the share price drops below $35 and your shares have not been sold, then your stop-limit order will not execute.

Place an Order

Inform your brokerage of your stop-limit sell order requirements. You can contact your broker by phone, email, fax or in person to place your stop-limit sell order. Alternatively, enter your stop-limit parameters in your online stock trading account if your brokerage offers this option.

Execution Not Guaranteed

Stock prices can move very rapidly in response to marketplace forces. Your stop-limit order is not guaranteed to execute. A simple stop order to sell almost always executes, but you run the risk that your sell price can be considerably lower than the stop price you entered. A stop-limit order minimizes this risk but increases the likelihood that your order will not execute.

                   

Resources

References

About the Author

David Sarokin is a well-known specialist on Internet research. A former researcher with Google Answers, he has been profiled in the "New York Times," the "Washington Post" and in numerous online publications. Based in Washington D.C., he splits his time between several research services, writing content and his work as an environmental specialist with the federal government.

Advertisement