Sharon L.,
is a stop loss order the same thing as a stop limit? I would think it is.
Not exactly. So:
You can do a stop market or a stop limit order.
Both are kinds of stop loss orders. Both orders have a stop activation price, a price under which (if it is a sell order) the order gets live and to the exchange.
The slight but important difference is that:
When entering a stop market order to sell 1000 DBCC with activation price at 22, you advice that your DBCC should be sold once the bid is at 22 or lower. REGARDLESS how low it is - the order becomes a market order after the activation at <= 22.
When you do a stop limit order you supply the stop order activation price of, say 22 and a limit price similar to a sell order say 21 5/8. What happens is that at 22 downwards the order is activated but in a way that it becomes a limit order to sell DBCC at 21 5/8 or better.
Both orders have their disadvantages. If you enter a stop market order pre-market, you can be shaken out when the marketmakers quickly drop the price - they can do it. Then you get the first and usually the worst price to sell.
If it is a stop limit order and the price is falling quickly, you have no assurance that your share will be sold at all. Ie. if it fall enough and your limit order is not executed as when the stop activation and the sell limit price are too close together, you may get no execution. Big trouble, too.
IMO I never would recommend to use stop orders, as they are mostly taken out during a trade day if they are set rather tight. If you want to exit a position, you can do it right now, or if you feel more comfortable then, close a part right now and keep the remaining shares.
Otherwise it is important to watch the market all day, if possbible, in such high volatile stocks like DBCC or any Internet stock.
Good trading,
C. |
