Why do some traders set a stop order instead of a stop-limit order?
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Why do some traders set a stop order instead of a stop-limit order?
Imagine you're selling a stock you bought at $50, hoping it won't drop too much. You're worried about losing too much money if the stock price falls suddenly.
A stop order turns into a market order when the stock hits the price you're worried about. A stop-limit order sets a limit price too, but it waits for that price to be available before selling.
Example
If your stock hits 40, a stop order lets it drop to 40 and then sells it at the next available price. A stop-limit order would wait for someone to buy at $40 or higher before selling.
Remember this
A stop order executes at the next available price, while a stop-limit order waits for a specific price.
Text adapted from Wikipedia, licensed under CC BY-SA 4.0.
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Educational content, not financial advice.
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