Expert: Steve Hach - 11/11/2007

Question
Hi Steve,
When trading stocks, what is the difference between “sell limit”, and “sell stop limit” order? Could you use a dollar amount in a scenario?
Thanks,
Randy
USA-MA


Answer
Hi Randy,

You can always find answers to these types of questions using google, this will be quicker than waiting for allexperts if you need the info in a hurry.

You can also get a book like "investing for dummies" or the barron's "dictionary of finance and investment terms" to help with definitions of things.

"Sell stop limit" works like so:

You order the broker to sell on the first tick in which the stock price obeys the following inequality

Limit<Price<Stop

"sell limit" works like this:

You order the broker to sell at the price of the first tick at or above the limit price


I found the following info at various stock trading websites using a google search:

Sell Limit Order
   You own Disney which is trading at $84. You think the stock can still go higher. So you place a sell limit order at $88. When the stock price rises to $88, your limit order is executed. If the stock price does not rise to $88, your limit order is not executed. Execution is always subject to the availability or the liquidity of the security.

Sell Stop Order
   You bought Disney at $80 and it's gone to $89. You think it's headed down so you place a sell stop order at $88 to protect most of your profit. If the stock hits $88, your sell stop order will be triggered and become a market order. At that point, your order is then eligible for execution at market, and the price you obtain could be lower than $88, depending on the price available at the time your order is executed.

Stop Limit Order
The stop limit order can be used to buy or sell. The stop limit order is a regular stop order that becomes a limit order rather than a market order when the order is triggered. With the stop limit order, an investor is trying to be even more precise about what price is acceptable. In the E*TRADE Canada system you must place your stop and your limit at the same price. Thus, a sell stop limit order in the sell limit example for Disney above would be placed as "sell Disney at 88 stop, 88 limit" meaning: "I want out at 88 and not less than 88".

Since it is a limit order, there is no guarantee that the order will be filled.



Best,

Steve