Rather than continuously monitor the price of stocks or other securities, investors can place a buy order or a stop order with their broker. These orders are instructions to execute trades when a stock price hits a certain level. A limit order is used to try to take advantage of a certain target price and can be used for both buy and sell orders. A limit order instructs the broker to trade a certain number of shares at a specific price or better. For buy orders, this means buy at the limit price or lowerand for sell limit orders, it means sell at the limit price or higher. A stop order, sometimes called a stop-loss orderis used to limit losses; it instructs the broker to execute a trade when a stock reaches a price beyond which the investor is unwilling to sustain losses. For buy orders, this means buying as soon as the price climbs above the forex price. For sell orders, this means selling as soon as the price drops below the stop price. This comparison uses stocks in the definitions and examples because that is limit most common scenario for individual investors. However, stop and limit orders can be placed for all kinds of securities, including options and futures. A limit order is an instruction to the broker to trade a certain number shares at a specific price or better. For someone wanting to sell, a limit order sets the floor price. Limit orders are executed automatically as soon as there is an opportunity to trade limit the limit price or better. This frees the investor from monitoring prices and allows the investor to lock in profits. The trade will only execute at the set price or better. A stop order, on the buy hand, is used to limit losses. This would limit the downside by putting stop ceiling on the price she pays to acquire the shares. In a regular stop order, once the set price is reached, the order is executed at the market price. A stop-limit order provides the option to set a stop price and a limit price. Once the stop price is reached, the order will forex be executed until the limit price is reached. Stop orders can be used to limit losses. They can also be used to guarantee profits, by ensuring that a stock is sold before it falls below purchasing price. Stop-limit orders allow the investor to control the price at which an order is stop. The stop price and the limit price do not have to be the same. Brokers may charge a high commission fee for limit orders. They also may never be executed if the limit price is not reached. When a stop order is triggered, the stock is sold at the best possible price, which may be lower than the price specified by the stop order, as the trade is not instantaneous. Forex risk can be avoided by placing a stop-limit order, but that may prevent the order from being executed at all. Stop orders can also be triggered by a short-term fluctuation in stock price. They can also be activated by short-term limit fluctuations. If you read this far, you should follow us: Log in to edit comparisons or create new comparisons in your area of expertise! Health Science Tech Home Food Buy Insurance. Comparison chart Limit Order versus Stop Order comparison chart Limit Order Stop Order Instruction Trade at a price equal to or better than a certain price. Trade if price moves beyond the desirable target. Intent Investors use limit orders to lock in the price they buy because limit orders are guaranteed to execute if they execute at all at a particular price or better. The intent of a stop order is to buy losses. Disadvantages Higher commission from stockbrokers. Possibly not executed if price not reached. Trade price may be worse than stop price. Can be triggered by short term fluctuations. Limit Order vs Stop Order 1 How Limit and Stop Orders Work 2 Advantages 3 Disadvantages 4 References. How Limit and Stop Orders Work A limit order is an instruction to the broker to trade a certain number shares at a specific price or better. Disadvantages Brokers may charge a high commission fee for limit orders. References Limit Orders - SEC. Follow Share Cite Authors. Limit Order vs Stop Order. Anonymous comments 1 March 3,2: Credit Cards vs Debit Cards CD vs Savings Account Copay vs Coinsurance HD vs HDX on Vudu Every Day vs Everyday. Make Diffen Smarter Log in to edit comparisons or create new comparisons in your area of expertise! Terms of use Privacy policy. Trade at a price equal to or better than a certain price. Investors use limit orders to lock in the price they want because limit orders are guaranteed to execute buy they execute at all at a particular price or better. Stop commission from stockbrokers.
Well, if this situation had occurred about 50 years ago, it would have been a huge deal.
Hi Phil, thanks for your comment and I definitely relate to your feelings of trying too hard and feeling frustrated.