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Registered User
Joined: 12/3/2004
Posts: 8
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I never know when to use either a stop or stop limit. What are the advantages and/or disadvantages of both. Can someone spell it out for me. I seem to learn everything the hard way.
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Registered User
Joined: 10/7/2004
Posts: 2,126
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Ren you must know the basics or order entry and well before you put your money on the line. Do not ask people in a chatting way about it, some of them may know as little as you or less. My advice to you is to get a book that explain all the basics, or your broker should also have literature on this topic and may be even be willing to help you understand it.
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Registered User
Joined: 12/2/2004
Posts: 1,775
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I'll give you my two cents, and I think it's worth at least that for someone like myself who has actively traded for about 8 years:)
For an exit, I almost always use a stop order (market) instead of a limit. An exit stop (market order) means you want OUT...NOW. Remember, a market order is GUARANTEED to execute, while a limit order ONLY guarantees that you will get your price or better IF it executes at all. If you trade stocks with decent liquidity, who cares if you don't get the absolute best price? Say I'm up 15% on a stock and it's currently at $24...I set a stop at say 23.70. The price falls to 23.70 and my stop order executes at 23.67, big deal. In this example if I had set a stop limit order instead, there's a real chance that the stock could have continued to plummet significantly lower without filling my order at all! And who know how low it would go in the days ahead.
As for entering, again, it depends on liquidity of stock and how much you're buying. If I'm buying a thinly traded stock that's subject to regular intra-day fluctuations of say 10%+, then darn right I will use a limit order only. If I'm looking to enter a heavily traded stock and I'm only buying say 100 shares of KO, then I may simply hit the market order buy button. If I get so bogged down in striving to get the best penny on the price, then the price may start moving away from me until it's at the point where a market buy would have given me best price.
Something to chew on, and the advice BigBlock gives is very wise.
Frank
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Registered User
Joined: 12/19/2004
Posts: 457
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I'm at the point where I'll use mental stops. Depending on how desperately I want to get out, I'll try to get out with a limit order above the market if I'm not in an extreme hurry. I feel this is better than a stop limit order, as you can adjust it to market conditions.
But if you are in a hurry, you should simply exit at market.
A preferable idea to getting out with a sloppy trailing stop is to use bollinger bands and momentum divergences to place an above market sell order. I described it in detail in the post on USU. It was also posted in a Worden Report 4/6/2005.
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Registered User
Joined: 12/3/2004
Posts: 8
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I have read books, but I guess I'm more of a "hands on" person. I have used stops in the past as a precautionary measure. I get nervous when the market looks to be going south and who knows when it will stop. But I have ended up triggering some stocks that I regretted losing.
Then, I too, used mental stops until I began getting nervous when one of my thinly traded stocks began going lower than its 30 day moving average, and I wondered if I would get stuck with stocks that wouldn't sell - not to mention losing my profit. I worry especially on a weekend when one never knows what is going on. So I slowly began to sell off some of them in incriments so as not to upset the price too much (I do like this stock)but business is business. I'm still holding 1500 shares and I want to protect those shares. This stock pays a good dividend, and I am retired so that monthly income is important to me. Normally, when it dips I don't worry about it because it always paid the dividend and would come back. But the overall market was headed a little too far south for comfort. I have never used a limit or a stop limit(not knowing exactly what that does.) But I now have put a stop on another 500 and have decided to hold on to the other 1000 shares to see what happens.
So that's my story and I thank all who have enlightened me. With the help of people like you, TC2000 and a lot of dumb luck I do OK in the market. Thanks again to all.
Ren1e28
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Registered User
Joined: 12/2/2004
Posts: 1,775
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>>I have never used a limit or a stop limit(not knowing exactly what that does.<<
en1e28, I'll try to explain again. A limit order can be a stop limit order, a buy limit order, or a sell limit order. The key thing to remember is that ALL "limit" orders gurantee the price you set or better. The downside is that the order is not guaranteed to execute. Just type in "stock limit order" in your search engine and you will get pleny of links explaining more in-depth. Happy investing and trading.
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Registered User
Joined: 12/3/2004
Posts: 8
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Thanks, I do so appreciate the information you have given me. Happy investing and trading to you too.
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 Gold Customer
Joined: 2/1/2005
Posts: 51
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Nothing was mentioned in reference to trailing stops. Are you aware of them, almost everyone has them , even Trade Station (for me with the latest download yesterday). You basically can place a stop below your purchase price by % or by $'s. This takes care of the problem of having a tight stop price and getting filled due to the market. If I have $$$$ and I want to pick up some stocks reasonably, I can alway's use low volume opportunities to lower the price to the stops from the general public. By continuously selling shares, the price can be lowered to pick up all the stops that are indicated in the book and via market maker's.
As to income, I have been using for years , Canadian Royalty Trust's, especially Oil and Gas. They pay 10-16% with most distribution on the 15th of the month. Plus your getting Canadian dollars instead of US. Converted at the time to your brokerage. (look at PTF as an example)
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Registered User
Joined: 12/3/2004
Posts: 8
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This is very interesting. You're right. I am not aware of trailing stops. You have to give me some time to digest what you are saying. I have printed it out and will mull it over. And I certainly will look into Canadian Royalty Trusts. Thanks.
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Gold Customer
Joined: 2/1/2005
Posts: 51
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Before I forget, check out VLCCF and the dividend yield.
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Registered User
Joined: 12/3/2004
Posts: 8
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Yes, I am aware of VLCCF, and NAT also.
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