Ok.....I am totally, but hopefully not irreversibly confused.....I have not used stops before, restricting my trading to limits and a few market orders......I've read the posts on stops......I've read the glossaries and explanations on various sites, and I suppose the only way I'll understand it is if I use an example, and then try it...here goes....tell me whats what......I bought XRX at 8.80...its finally made a little headway.....my "system" says get out with ~$40-$50 profit, or there-abouts.....my target is 9.60......I know I can put in a limit order for that and hope it will get there......since I am not home during trading except for lunch, around 2-3 est, I figured a stop at 9.60 would have some advantages.....1)if it gets there and drops while I'm gone, I'll probably still be ahead 2)if it hits and goes UP, I'm ahead just a little more 3)if nothing happens before I get home for lunch, I can see whats going on and maybe make an adjustment. Not a perfect setup but workable, I believe.Now here is my problem....at least I think.....when I access my brokers site I select Sell...Stop...my stock...shares...and stop price (9.60) when I hit place order I get an error message that reads, in part "...stop price must be lower than current bid price..." I don't get it...if I am selling, but don't want to until a specified price is reached, then why oh why am I restricted to setting a selling price that seems to me to be below the current price???? Is this correct or is there some reason my broker would limit transactions this way?Mike
A stop on a stock you are long on is placed below the purchase price.A stop on a stock you are short on is placed above the sell (short) price.The purpose of stops is to protect your money. If you bought XRA at $8.80 a stop placed at $8.10 would sell the stock if it falls to $8.10. This is a 8% stop excluding commissions and fees. What I do for a long purchase (most of the time) is set a stop at 8%. If the stock moves up, I move the stop up (a trailing stop). As the stock moves up, the amount betwen the stock price and stop price widens from 8% to what ever I feel is correct.Stops are one of the most important tools to use. Preserve capital.A sell limit is placed above the purchase price. I cant set a sell limit and a stop at my broker, so I would set the stop.I do, at times, not use stops.
Can I assume that different brokers use these in different ways? I'm reading about stops on the Equit Analytics site. In response to a question about buying at one price and selling higher it refers to limit orders and then it goes on to say "If you definitley want to get out of the stock when it reaches $36 (it was bought at 30), you might place a second type of order called a stop order. A stop order becomes a market order once a specified price is hit..."
I select Sell...Stop...my stock...shares...and stop price (9.60) when I hit place order I get an error message that reads, in part "...stop price must be lower than current bid price..."Mike...If I understand you correctly, it's not a stop order you want to place, but, rather, simply a sell order which will execute if/when the price gets to 9.6. A "stop" is used to prevent your position going too far underwater and, consequently, would require a price below the current one.Sandy
ok....so in a good scenario.....I would put in a stop order at say...9.10....assuming that is the current bid (or lower) and as the day wheres on, if it keeps going up I keep adjusting the stop up...9.25....9.50....etc.......and if, at the end of the day there is a sell off at 9.50, then I would be likely to come out ahead as opposed to if I just sat out the day and tried to get out at the last minute at a much lower price......right? sort of??Mike
ok....so in a good scenario.....I would put in a stop order at say...9.10....assuming that is the current bid (or lower) and as the day wheres on, if it keeps going up I keep adjusting the stop up...9.25....9.50....etc.......and if, at the end of the day there is a sell off at 9.50, then I would be likely to come out ahead as opposed to if I just sat out the day and tried to get out at the last minute at a much lower price......right? sort of??You almost have it. You place your buy order first..say at $10.00 or what ever. THEN, you place a sell stop order at $9.20 or what ever you want to set it at. If your stock goes from $10 to $9.20 your sell order is activated. This does not mean that your stock will sell for $9.20. In a fast moveing market, it could sell well below $9.20. $9.20 is the activation price, not the sell price. Once your activation price is hit, your stop order becomes a market order to sell. Or, the stock could gap down the next day to say $8.50. Your stop order will be activated as soon as the market opens and your stock will sell for $8.50 or less.Ok, lets say your stock goes from $10.00 to $11.00. You could cancel the first stop order at $9.20 and set another one for $10.25 or something, this preserving some profits.
Ok....so can I set up a sell/limit order.....wait to see how things progress during the day.....and then set up a stop to protect any gains? (my broker site lets me go in and modify unexecuted orders)
ok....so in a good scenario.....I would put in a stop order at say...9.10....assuming that is the current bid (or lower) and as the daywheres on, if it keeps going up I keep adjusting the stop up...9.25....9.50....etc.......and if, at the end of the day there is a sell off at9.50, then I would be likely to come out ahead as opposed to if I just sat out the day and tried to get out at the last minute at a muchlower price......right? sort of??In a good scenario...you could if you have a broker that has an OCO (order cancels order) option Put in a stop for the 9.10 (and move it up if you were at the puter) AND an order to sell at 9.90 (or something) So if it went up to 9.9 then down while you were away 9.9 would trigger and cancel the stop at 9.10. The problem is if it went on up to 12 you'd not be happy! Sandy explained the OCO option awhile back and I think I have it right. He probably explained it better.An example...if I had that optionI bought AMK at 9.55 when it went to 10.25 I put in a stop at 10.04, I did not expect this one to get past 10.5 and maybe move down...So I would have liked to put a sell in at 10.5. If I got to 10.5 before it went down to 10 I would have been alot more ahead.Jean
Ok....so can I set up a sell/limit order.....wait to see how things progress during the day.....and then set up a stop to protect any gains? (my broker site lets me go in and modify unexecuted orders) You can but if it goes down fast you could end up with a big loss if you didn't put in a sell stop.at rjt I can modify my orders, but I can't change a sell to a stop. I'd have to cancel the sell and then put in a stop...which with rjt is not a fast operation. As far as I know rjt does not have order cancels order. But I think IB does
Mike:I believe it was Janny a few days ago, who came up with a perhaps more fitting definition for these terms. She called them "stop-loss" and "protect gain". A "stop loss" would be a stop order below your purchase price and a "protect gain" would be any stop order above your purchase price. Example: You buy XYZ at 10.00 and set a stop loss at , say 9.50 to make sure you don't lose too much if the stock takes a dive. But if it starts moving up, say to 11.00, then you can set your "protect gain" stop order at 10.75. Now, if the price dips, you'll still have some gain. The stop order (on longs) must always be below the current bid price for obvious reasons. Hope this helps.~josie
Josie...sure glad you gave credit to Janny for the "protect gains" I think she said something about a patent or copy right on the term! LOL
I appreciate all of the help, and this is what I think I'm going to do....tomorrow before work I'll put in a limit order, XRX for 9.65 (nice number) it high, but since I get home around the usual after lunch market upswing, it should provide me some leeway......if, first of all, the market doesn't get suicidal and sell off after one day of decent gains, AND XRX has advanced a decent amount, I'll try and modify the order to a stop or stop limit...I believe I can do that because I just accessed the site and fiddled with an outstanding order....one of the fields that can be changed is the type of order.....I figure one of three things will happen....slight gain and/or slide within the range,and nothing happens.......it hits the high end and executes, given about a 50 cent range any damage should be minimal......it slides after the stop is put in, and again the damage is minimal.....I don't have a lot of XRX and its making me nervous so its a good candidate to learn with....also, I've violated one of the tenets of my "system" which is to have a reserve and not be totally "engaged"...breaking even or slightly ahead, at this point, is far better than hoping/wishing/praying for a windfall.......besides I need something like a "technical" success to cheer me up.......:)Mike
Mike did you look to see if they have an "order cancels order" function?
nothing in the site refers to that specifically, though it may be in their "rules" wherever that might be.......I tried to call their investor services tonite and hung up after 15 minutes on hold! (never happens) Maybe some heavy trading.......I was going to ask them how they work....it just seems to me that various folks use identical terms for slightly different functions, and identical functions have slightly different terms......like this reference in front of me that refers to setting a STOP price at a higher, future price.....it makes sense if you can get a broker to support such a trade....but mine doesn't....obviously......probably depends on the sophistication and complexity of the broker's programing......Mike
Mike did you look to see if they have an "order cancels order" function? Now that I think about it, I don't believe they do......I've forgotten orders I put in at one price and then tried to put in another at a different price....the system always told me that I already had a current order and would have to modify or cancel that one first.....Mike
IB order types page states:STOP orders are provided for both equity and commodities accounts. Please note that STOP orders placed on NYSE products are handled differently than STOP orders on NASD products. A STOP order becomes a market order to buy or sell securities or commodities once the specified stop price is attained or penetrated. A STOP order is not guaranteed a specific execution price.Does anyone know what the difference between the nyse and nasd in handling stop orders? They give a link to the NYSE..but I didn't know where to look thereBTW IB has what they call OCA...One cancels all orders. It has to be put in special. Here is a link for their explaination of ordershttp://www.interactivebrokers.com/html/tws/order_types2.html
Hi Mike.First let me say that XRX is a terrible stock. You should sell it and short it immediately. Just kidding. I don't know anything about XRX.All stop orders are orders that are place below the current selling price. Lets say you own 100 XRX right now. Say tomorrow it opens trading at 9.15. There are two types of stop orders. Both must be placed at or below the current selling price.Say you don't want to risk XRX going much below 9. You could put in a stop order to sell 100 XRX with 9 as the trigger price. Now is XRX has any trades at 9 or less, you order is triggered or activated and it becomes an order to sell 100 XRX at the market. Now you might sell at 9 even. It could also say below 9. Your order became a sell at market order once it was activated when 1 or more shares of XRX traded at 9. So if XRX is dropping there might not be any orders in the system to buy it at 9. So you might sell for say 8.95, 8.90 or 8.80 or even lower. It would depend on what the next buy order is that your order gets matched up to. You might even sell at a price slightly higher than 9. People usually use a stop order when they want to be 100% sure they sell out of the stock if the stock reaches their predetermined price.You can also put in a stop limit order. Say you put in a stop/limit order at 9. You order is activated once 1 or more shares of XRX sells at 9 or lower. And then it becomes a sell/limit order to sell 100 XRX at 9 or better. This order would be used if you don't want to sell for anything less than 9. But if XRX is dropping, it could sell at 9. Then the price could keep dropping. Say it keeps dropping to it's short term support of about 7.25. Your order still wouldn't be filled. And it wouldn't get filled unless XRX reverses and rises back up to 9 or higher.But all stop orders require a selected price or activation price to be at or below the market. And if you set it at the market, your order would be immediately activated. So you should always pick a price below the current price. I'm not even sure if you can select the exact current price.Any order set above the current price is a sell/limit price. Again say XRX opens at 9.15. If you want to sell your 100 XRX you would put in a sell/limit order, say at 10. That is simply an order to sell your 100 XRX at a price of 10 or better. On long positions prices set above the current trading price are not stop orders. Stop orders can only be set (maybe at ?) below the current trading price.Now many brokers accept combination orders. I heard it called one cancels other (OCO), order cancels order (OCO) and IB calls it once cancels all (OCA). With a OCO or OCA order you pick one price below the current price and one price above the current price. Say you don't want to sell your 100 XRX much below 9. And you want to sell it if it gets to 10. You would use a combination OCO or OCA order. You would set your stop price at 9. This would become a sell at the market order if 1 or mores shares or XRX trades at 9 or less. And you would set the higher sell price at 10. This is an order to sell 100 XRX at 10 or better. Once either of the price targets are reached and your trade is executed, the other order is immediately cancelled.Maybe it you tell who your broker is someone in the group might know if you broker permits OCO or OCA orders.Eddie G
Hi Mike.Let me correct my last message. If you short a stock, then a stop price would be a price that is higher then the current trading price. But if you are long, all stop order must be placed below the current trading price. If you are short it is the opposite. All short stop orders must be placed above the current trading price.Eddie G
So if you are short a stock you stop price is placed above the current trading price. This would be a buy/stop. If it is activated you buy back the stock you are short, thus stopping out your short position. When you are long the stop order is a sell/stop. If it is activated you sell the stock you are long, thus stopping out your long position.Eddie G
Regarding stops: you have to understand that while they generally save your bacon, they can (and have) backfired on traders in disastrous ways. When the Emulex hoax hit the market, the price dropped from around 110 to about 45 in a matter of 10-15 minutes, before most shareholders knew what hit them. Not only Emulex, but several related issues experienced a precipitous loss in sympathy. Because of the suddeness of the drop, traders who had trailing stops had those stops turn into market orders which triggered far below the point they were set at. For a real eye-opening look at the pain this caused, check postings on the Emlx board for that day and the days that followed. It really was a tragedy for many innocent and careful people.When that thing happened, it was such a fluke, most people dismissed it as a freak circumstance that could never be duplicated. But the fact is, it has happened again, several times although not in such a dramatic high profile manner. A few months later, a false rumor hit Sun Microsystems (check that board for threads relating to Sun getting "Emulexed"). And rumors on the trading floor almost daily give more than one stock a sudden haircut. When one of these things hits, it doesn't matter if the news taking the stock down is true, what matters is the impact on shareholders. When you give control to the MM as a false rumor knocks you out at a big loss, the subsequent bounce back up in price (particularly during a halt) means you can't get back in at a price anywhere close to where you were stopped out. As I recall, Emulex was halted at around 45, within seconds of reopening it was back in the high 90's to about 104. Can you imagine discovering your two or three hundred (or more) shares just lost 60 points apiece(60 x 300 = $18,000!) and you never knew what hit you? Especially since the price recovered almost as quickly, and those without stops in place got through it unscathed.Granted, sometimes those rumors turn out to be true and those who DIDN'T have stops set get bloodied. And that's the far more frequent occurrance, the one prudent traders set stops for.I'm not posting this to say stops are bad. Far from it. I think it's important to understand setting stops does carry some (small) risk. A stop order saved me from a disaster of the Emulex magnitude once and I thank my lucky stars I had the sense to place that order. Another stop order kicked my butt because I goofed in placing it (the reason why the mere mention of PALM still sends me digging through the medicine cabinet for razor blades and/or pills.)The bottom line for me is, I don't routinely use stops, and I'm comfortable doing so for several reasons. I only buy stocks I'd buy to hold for ten years so if I get stuck with them, they go into my long term port and most earn decent dividends while they sit there. In addition, I'm only watching a very few ST holdings at a time and when I'm holding something, I keep a pretty close eye on things. I've sold an awful lot of stocks way too soon, but that's balanced by the fact I don't choose to take losses anymore. I know I'm taking chances, but that's inherant in any endeavor where there's reward to counter risk. I've evaluated the level of risk based on my holdings, my trading style, and my willingness to accept the consequences of what I'm doing. I think you have to be fully informed of both sides of the stop setting issue before you decide for yourself how you're going to handle it.
Josie...sure glad you gave credit to Janny for the "protect gains" I think she said something about a patent or copy right on the termFor your own purposes, it might be helpful to think of them in terms that make sense to you. But it's important to understandand and internalize the exact terminology your broker uses. Take it from the voice of experience, it doesn't matter one bit to your broker what you INTENDED to do, the order executes as you entered it and that's all there is to it. If it's fixed in your mind as one thing, and you have to stop and think to translate that to your broker's definition to set your stop, it makes it much more likely you'll get confused in the heat of the moment and wind up doing exactly what you didn't want to do with an order.
All stop orders are orders that are place below the current selling priceNope - remember it's backwards when you're shorting. That's when you WANT the price to go down, so don't goof and stop yourself out just when it's getting good.
I believe it was Janny a few days ago, who came up with a perhaps more fitting definition for these terms. She called them "stop-loss" and "protect gain".Josie....give the flower's to who it deserves!! :-)It was Calabogie, who corrected me, as "I" dummy told about a "stop gain"!! LOLHe explained the phrase you mentioned!So I told everybody I have a patent on the term "stop gain" LOLJanny
Please note that STOP orders placed on NYSE products are handled differently than STOP orders on NASD products. http://www.freedominvestments.com/Whatsnew/newsletter33.htmlof particular interest:Stop orders placed on listed vs. OTC securities are handled differently. Stop orders on listed securities are triggered by an actual trade occurring at the stop price. Stop orders on OTC securities are triggered by the bid or ask reaching the stop price.Note: Stop orders may NOT be placed on Pink Sheet or Bulletin Board (BB) stocks, as all quotes are displayed as "subject quotes. "jnk
"So I told everybody I have a patent on the term "stop gain" LOL"Janny:To ensure that credit goes where credit's due, let's call your version "stop gayne":-))~josie
Janny:To ensure that credit goes where credit's due, let's call your version "stop gayne":-))~josieSo I'm allready "Calamity Jane" and now I've got a "Stop gayne" LOLAt least you will never call it a " Calamity Gayne", as gains are never calamitious!! LOLJanny
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