NEWBIES BOARD

[Garyst]

Nightly Topic: Stop limit/Loss Orders.

Setting a Stop Limit Order protects you on the way down. Lets say if a stock is trading at .12 and you want to protect your gains you may have you could put in a "Stop Limit" of say 08. As soon as it hit 08 it will execute your order but with a "Limit" order you are saying you only will sell for 08 and if it is free falling it might go right past the 08 and never catch you. A "Limit" says you will only sell for 08. The stock might close at say 05 and you might ed up with even a larger loss in your account as it missed your Order at 08 being it was a "Limit" Order"

Stop Loss Order works the same BUT it says you want to sell at 08 but will take anything below that also as you just "want out". If it misses you at 08 it will still sell you out at say 07 or 06 on the fall as a "Loss" order basically say you want out at 08 but will take anything lower also.

Keep in mind sometimes we see (especially on Promos) where there is a steep drop for 5 minutes and then right back up. With limit orders in place you might come home and see your order was sold on that quick drop down even though the stock may move right back up and make a 30% gain at the end.

Limit/stop orders can be a good thing but they can also backfire also as described in the paragraph just above.

Tomorrow nights topic is trading on emotions and the downfalls.