Stop Order

A stop order, also referred to as a stop-loss order, is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price.

Stop Order

A stop order, also referred to as a stop-loss order, is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price.

 


Application of Stop Order

When the stop price is reached, a stop order becomes a market order. A buy stop order must be entered at a stop price above the current market price.  Likewise, a sell stop order must be entered at a stop price below the current market price.

Investors generally use a buy stop order to limit a loss or to protect a profit on a stock that they have sold short. Investors generally use a sell stop order to limit a loss or to protect a profit on a stock that they own.


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