bob79924
38 posts
msg #28406
- Ignore bob79924 |
9/8/2003 2:37:54 PM
deprez:
I think you got mixed up between a sell limit order and a stop sell order. With a sell limit, the broker can only sell at the limit price but not lower. With a stop sell, it becomes an ordinary market order once it hits the stop price. Others are correct about buying: always use a limit order for that. Here's the rules on selling from Ameritrade FYI:
A stop order is an order to buy or sell a stock at the market price once the price reaches or passes through a specified point, called the "stop price." This type of order is generally used by people who own a stock and want to make sure they sell out if the stock price starts to drop. The stop price placed on a sell stop order must be below the current bid price of the security.
For example, if you buy 100 shares of Zephram Motors at $50 a share and you want to protect yourself from a potential loss, then you might place a stop order. If you placed a stop order at $45 a share, the moment Zephram Motors traded at $45, your order would become live and the broker or specialist would sell it to the highest bidder. Stop orders in volatile issues will not guarantee an execution at or near the stop price. Once triggered, they are competing with other incoming market orders.
Stop orders can be placed for buy orders as well. The stop price specified for a buy order must be above the current asking price.
A stop limit order performs like a stop order with one major exception. Once the order is activated (by the stock trading at or "through" the stop price), it does not become a market order. Instead, it becomes a limit order with a limit price equal to the former stop price.
For example, you place a stop limit order to sell stock with a stop price of $45 a share. As with the stop order, once the stock trades at $45, your order is triggered. However, the broker cannot sell it below $45 a share no matter what happens. The advantage of this order is that you set a minimum price at which your order can be filled. The disadvantage is that your order may not be filled in certain fast market conditions. In this case, if the stock keeps moving down, you will keep losing money.
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chessnut1
58 posts
msg #28419
- Ignore chessnut1 |
9/8/2003 11:51:33 PM
I use Scottrade for now and they require that stop sell orders be placed 0.25 below the bid. I'm just about fed up with that. For smaller priced stocks that you want to keep a tight trailing stop in place, the 0.25 gap can be just too much. So I have been resorting to straight-out market sell orders when my mental stop is hit. Others face this same problem? --BJ
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chessnut1
58 posts
msg #28420
- Ignore chessnut1 |
9/8/2003 11:56:33 PM
PS. Thanks EWZuber for the helpful comments. BTW, IB = ? --BJ
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EWZuber
1,373 posts
msg #28423
- Ignore EWZuber |
9/9/2003 9:35:37 AM
IB= Interactive Brokers.
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bob79924
38 posts
msg #28455
- Ignore bob79924 |
9/10/2003 12:57:54 AM
I don't know if Ameritrade has a limit on how close below the bid price a stop sell can be set. If there is one, I haven't happened to hit it. I know it's no where near as far as $0.25. I've sometimes set stops a few cents below the bid. One thing for sure, they won't accept any kind of limit order on an OTCBB stock, only on NASDAQ and the other exchanges.
Bob W.
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