I have researched but am still confused about the details on how stop-limit orders work?

Question

I know you have to enter the current price of the share, then the limit, then the activation price.

This isn't the stock I'm buying into but for example, if I want 50 shares of AAPL @ $323.60 a share.. If I enter my limit price at $323.60 and my act. price at $323.60 also and while I'm making the trade the share rises to $325 a share, will my order still execute or will it expire? And if it does execute, since the 50 shares I'm wanting cost more than they initially did, would it execute if I don't have enough funds in my account to cover the extra costs of making the order? I don't wanna owe my broker any more money than what I have deposited in my account.

Thank you very much for helping me and if this is too confusing just tell me and I will try to make it more simple to understand.

Answer 1

The best way to think of it is that the stop-limit is a series of orders.



The stop price is an order where once the trading price of AAPL passes your "stop price" of $323.60, the stop order says "go"



Your limit order says that you will buy 50 shares of AAPL at $323.60 per share or lower. That is how limit orders work. Once your stop order says "go" your limit order hears this command and becomes active:



That's why it's called a "stop-limit"



So at this point you have a stop-limit order out to buy 50 shares of AAPL at $323.60 or better. If the price passes $323.60 (your stop) and then activates your limit order, (at $323.60) but then continues to rise to $325 without ever coming back down to $323.60, then your limit order will never be filled.



This is why traders often like to set their stop price different than their limit price.



You might set the stop price at $323.60, but then set your limit to $324. That way if $323.60 is passed, you will hopefully pick up the shares at $324 or better before the stock runs up to $325 and beyond.



Traders often prefer stop-limits over "stop" orders because if you have a stop order with no limit, your stop activates a market order where you are willing to pay whatever the market price is for 50 shares.



If some important piece of news comes out, like say AAPL sues Microsoft and wins $50 billion, the stock might skyrocket to $500 in an instant. If you have a stop-market at $323.60, your stop would be triggered and you would have an order to buy 50 shares of AAPL at $500, which you may or may not actually be able to afford. That's the danger to a stop-market.



Rule of thumb, ALWAYS use limit orders, whether you are using a stop or not.

Answer 2

end shrink Order it is a sort of order that mixes the useful properties of end order with those of a shrink order. A end-shrink order would be finished at a special fee (or greater effective) after a given end fee has been reached. as quickly as the end fee is reached by the industry, the end-shrink order will become a shrink order to purchase (or sell) on the shrink fee or greater effective. This order is then dealt with as defined by a shrink order. the in many circumstances used purpose of a end-shrink order is to furnish the dealer greater administration over the place the order must be crammed. the drawback, as with every shrink orders, is that the commerce isn't rather finished if the inventory does not attain the shrink fee. a majority of those orders additionally may be placed GTC (reliable til cancelled); they won't be placed AON (all or none). end shrink orders are utilized by some traders to purchase a inventory while it reaches a definite fee, permitting the investor to purchase while the inventory has upward momentum in the back of it. Please fee

Answer 3

Stop limit orders are actually more than one order. You have the conditional order, the stop order where if the market price reaches the activation price, the stop is executed, when the stop is executed it creates the limit order which does not exist until the stop is met.



In your example, you have a stop of $325 a share when the market price is below that so the stop order activates when the market price meets or exceeds $325 at which point it becomes an order to buy at the limit of $323.60 but since the market is already at $325, all the sellers will do is say fat chance to you and your order will sit as a bid of $323.60 on the order book until you cancel the order or until the market price drops back down to $323.60.



If you have your stop and your limit both at $323.60, all that means is that when the market price meets or exceeds $323.60 then the stop will turn into a order to buy with a limit of $323.60 but the market price may have already exceeded that price or it may be at that price so you may or may not buy at $323.60, it's likely that your order will just sit on the order book as a bid of $323.60 but it does have a chance of being filled.



If you wait till you see a market price of $323.60 before you place your stop limit order to buy then all three prices will be the same on your order, your broker won't know whether to activate when the market price exceeds or drops below the stop price as you've entered the same price for everything but if the market price is still at $323.60 (remember the market price that you see is the last trade price so it's already gone and the market may no longer be at that price when you see it) then it becomes a order to buy at the limit of $323.60 and may or may not be filled as before. However it's likely that the market price will no longer be at $323.60 and as the broker can't determine if you meant for the stop to be above or below the price he'll have to guess which it is or reject the order. There's a good chance that if the market price is already above the $323.60 he'll treat the stop as being below the price hence it won't activate till the market drops to $323.60 or below before turning into a buy order but if the market price is below $323.60 then he may treat it as a stop above in which case the stop won't activate till the market price reaches or exceeds $323.60.

Answer 4

A stop limit order is the combination of a limit order and a trigger. The stop is the trigger, and goes into effect as soon as the stop price is touched.



In your example, that's $323.60. As soon as the market touches $323.60 (or higher), your limit order becomes live. You can set your limit order wherever you like. If you set it at $323.60, then you are saying that you want to buy the stock at $323.60 or lower.



So once the stock trades at $323.60, if there are a lot of shares offered at that price, your limit order may be instantaneously executed. However, if there is only one trade at that price, and the market moves higher, then your limit order will sit waiting to be executed, until the price comes back down.

Answer 5

A 'stop' is a trigger, like on a mouse trap. It just says, when this price is hit make a market order at that point...no matter where the market is going. A limit is an exact price....OR BETTER.