Always buy or sell a stock at a specified Limit price (which you decide). This ensures you dont get burned buying/selling at the market price. Stocks with lots of trading shouldnt be a big deal, but you for sure want to do limit transactions for low float stocks. All it takes is some jackass at the wrong time for you buying stock at $1, and you sell at market price which you think is $30. But his bid at that market price timing is $1. So you got burned. This is probably why in pre market and after hours you get some wacky shit people buying and selling at weird low or or high prices. Some guy probably did a market order and got hooped.
A Stop price is when the stock hits that price you specify, so it goes through. So lets say a stock is $80. You can put in a stop order that says if the stock hits $70, you sell. Or it's set at $90 and it sells too. You set a price so you dont sit there all week waiting for it or doing manual orders. The system does it for you when it actually happens.
Limit orders and stop orders give stock traders greater control over their transactions in the market. Learn the differences between these order types.
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KEY TAKEAWAYS
- A limit order instructs your broker to fill your buy or sell order at a specific price or better.
- A stop order will activate a market order when a certain price has been met.
- Although stop orders avoid the risks of no fills and partial fills, you may end up with a lower or higher price than you expected.
- A stop-limit order combines the features of both a limit and a stop order.