Stop Order

A stop order is market order to buy or sell a certain quantity of a certain commodity or futures contract if a specified price (the stop price) is reached or passed. A stop order becomes a 'market order' only when the specified price level is reached. This order is used to either enter a new trade or to exit an open trade. The Stop Order does not guarantee that you are going to get in at that exact price, because as stated, when the price is reached or penetrated, the order becomes a market order. Also referred to as a Stop Loss order.

buy stop order is placed above the current market and is elected only when the market trades at or above, or is bid at or above, the stop price.

sell stop order is placed below the current market and is elected only when the market trades at or below, or is offered at or below, the stop price. Once the stop order is elected, the order is treated like a market order and will be filled at the best possible price.

Stop Limit Order lists two prices and is an attempt to gain more control over the price at which your stop is filled. The first part of the order is written like the above stop order. The second part of the order specifies a limit price. This indicates that once your stop is triggered, you do not wish to be filled beyond the limit price. Stop limit orders should usually not be used when trying to exit a position. This order becomes a market order only when the specified price level is reached. A buy stop is placed above the market and a sell stop is placed below the market.

Stop orders are used for three primary purposes; to minimize or limit a loss on a long or short position, to protect a profit on an existing long or short position, to initiate a new long or short position.

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Information is believed to be reliable and is provided 'as is' without warranty.