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Why would an investor choose to place a limit order or a stop order?
A limit order is an order to buy or sell a security at a specific price or better. Investors generally use a buy stop order to limit a loss or protect a profit on a stock that they have sold short. A sell stop order is entered at a stop price below the current market price.
Can you set a limit order higher than market price?
If you want to pay a higher price, above the limit orders appearing on the queue then yes; you will beat the queue and get filled immediately at higher prices. If you keep buying with market orders then you will keep filling or completeling the sell side of the queue.
Is stop loss a good idea?
Most investors can benefit from implementing a stop-loss order. A stop-loss is designed to limit an investor’s loss on a security position that makes an unfavorable move. One key advantage of using a stop-loss order is you don’t need to monitor your holdings daily.
What happens when a trader sets a stop limit order?
The trader doesn’t want to lose more than $5 per share, so they set a stop limit order for $35. If the stock goes hits $35, the stock will be triggered to sell. However, the trader doesn’t want to sell for a very low price, so they set the stop limit order to only sell between $32 and $35.
What is a limit order in stocks?
What Is a Limit Order? A limit order allows an investor to sell or buy a stock once it reaches a given price. A buy limit order executes at the given price or lower. A sell limit order executes at the given price or higher. The order only trades your stock at the given price or better.
What happens if a stock goes above its limit price?
If the stock rises above that price before your order is filled, you could benefit by receiving more than your limit price for the shares. If the price falls, and your limit price isn’t reached, the transaction won’t execute, and the shares will remain in your account. It takes some experience to know where to set limit prices.
Why does my limit order go to the top?
If the price on your limit order is the best ask or bid price, it will go to the top and may be filled very quickly. If not, it will get in line with the other trade orders that are priced away from the market. As other orders get filled, your order may work its way to the top.