Stop Orders: An Essential Tool For Your Trade Arsenal

Stop Orders: An Essential Tool For Your Trade Arsenal

It would be quite hard, especially for the regular investor who has a regular forty hours per week job, to trade and profit from the markets if there were no stop orders available to him. This type of order will enable you to place an order in your home broker, or have it placed by your broker, that will define beforehand where you want to get out in case things do wary. It doesn't matter whether you are on the buy or on the sell side.

Buy stop order

This type of order serves many functions and you will be using it constantly, so it is a good idea to take your time and find out what is this all about. You have probably heard of this before, but in a nutshell, a buy stop order will make you define beforehand under which circumstances you will want to buy a certain stock. So, you define the quantity, the limit date, you maximum price and when the order should be place in the market.

So suppose you want to buy a certain stock that you have seen it the day before whilst doing your night studies, but you only want to buy if it breaks yesterday's high. That can be achievable by using a buy stop order that will mainly be saying to your broker "Ok, if the stock pass this point that I have set, then I want you to put a buy limit or market order". That is it, simple as that.

Conclusion

Buy stop orders are a useful tool and you can use them for either when you want to buy your preferred stock since you believe it will move to higher grounds or, you can buy it back to limit your loss if you were short on that particular stock.

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